By Brenda Goh

SHANGHAI (Reuters) – The Chinese joint venture of SoftBank Group Corp-owned Arm Ltd rejected on Thursday allegations of misconduct made by its investors against its CEO and said it would take legal action, escalating an internal spat.

The internal conflict at one of the global chip industry’s major suppliers spilled into the open on Wednesday after Arm Ltd and its China joint venture publicly disagreed whether the unit’s CEO, Allen Wu, had been fired.

British-based Arm Ltd and Chinese private equity firm Hopu Investments, which co-own Arm China, had said they replaced Wu with interim co-CEOs Ken Phua and Phil Tang after an investigation found serious irregularities with Wu’s conduct.

Arm China said on Thursday the allegations had negatively affected Wu and the firm, and that it had entrusted lawyers to look into the matter. It had said Wu continues to be its CEO.

It said a board meeting by Arm Ltd and Hopu Investments held on June 4 to dismiss Wu had not followed procedure and thus could not “trigger a personnel change”. It added that Tang had been dismissed from the joint venture on May 26 due to “serious violations” and no longer represented the company.

A spokeswoman for Arm Ltd told Reuters that they stood by their previous statements.

“Arm China’s relevant operations are carrying on as normal,” the joint venture said.

Reuters could not immediately reach Phil Tang through Arm Ltd for comment.

Arm China, which generates revenue by licensing chip architecture to Chinese companies, was established in 2018 when SoftBank sold a 51% stake in Arm Ltd’s Chinese subsidiary, Arm Technology (China) Co Ltd, to a group of Chinese investors. SoftBank had acquired Arm in 2016 for $32 billion.

The spat comes as Arm grapples with rising tensions between the United States and China over technology. Last month, the Department of Commerce placed additional restrictions on smartphone maker Huawei Technologies Co Ltd that would prevent certain U.S. companies from supplying to it.

(Editing by Jacqueline Wong)