LONDON — SoftBank Group, owner of microprocessor IP firm Arm, announced this week that the British firm will sell 51% stake of Arm's China unit to Chinese investors and ecosystem partners for $775.2 million to form a joint venture for Arm’s business in China. Under the agreement, Arm will still receive a significant proportion of all license, royalty, software, and service revenues arising from Arm China.

Arm had already transferred its IP to the joint venture last month, enabling its Chinese operation to enable local chip developers license technology directly in China. This has raised alarm bells within the European Union, with the EU Commissioner for Trade, Cecilia Malmström, launching legal proceedings last week in the World Trade Organization (WTO) against Chinese legislation that undermines the intellectual property rights of European companies.

Whether Arm’s hand was forced or not, the company’s rationale for the latest transaction was outlined in SoftBank’s press statement, saying that around 95% of all advanced chips designed in China in 2017 were based on Arm technology, with 20% of the company’s global revenues coming from China in the fiscal year ended March 2018. The statement adds, “The Chinese market is valuable and distinctive from the rest of the world. Arm believes this joint venture, which will license Arm semiconductor technology to Chinese companies and locally develop Arm technology in China, will expand Arm’s opportunities in the Chinese market.”

Arm would not comment on the statement, but what the transaction means is that Arm China revenue will no longer be reported under SoftBank’s consolidated accounts once the transaction completes, which it is expected to do this month.