China’s 100% lockdown means ‘months of complete chaos’, says Arm co-founder

Tudor Brown, ex-president and co-founder of Arm, talked to Ting Zhang, founder & CEO of Crayfish.io, about balancing IP protection with risk-taking and relationship-building when doing business in China.

At the Crayfish China Semiconductor Roundtable, Tudor Brown shared his views on the outlook for doing business in China’s semiconductor industry with Ting Zhang and the audience of CEOs of leading UK and European companies.

The most pressing issue, however, is China’s ‘dynamic zero-Covid’ policy which Mr Brown calls “a major problem that’s going to be with us for quite a while”, with “stringent, frequent lockdowns [which] fuel public discontent and deal a devastating blow to the Chinese economy”.

“The political approach to lock down major cities like Shanghai is causing China a major problem that’s going to be with us for quite a while because of the big effect on companies operating in China,” said Mr Brown, who was involved with Arm for 29 years after he co-founded it in 1983. “It’s also going to have long-term effects on the global supply chain, bigger than the glitch we had with the Wuhan outbreak over two years ago.

“Finally, the complexity behind the Ukraine crisis and how China is dealing with it is going to have ramifications but right now there's no point in speculating which way it will flip so just think of it as a very unstable short-term issue.

“It’s very difficult to predict the future of course but it’s very clear to me that we’ve got a few months of complete chaos ahead of us, in terms of how difficult it is to just move stuff around – especially Shanghai and Taiwan – and therefore to keep production lines running is the short-term thing. China has shown an ability to bounce back from such problems quite quickly so if we look a bit further than that, putting Ukraine aside, I think the outlook is still very good.

“As Ting mentioned, China is massively building huge capacity in semiconductors that is matched by massive growth in its markets. There is lots of innovation going on in China and so the Chinese market is going to continue to grow.”

Mr Brown is phlegmatic about IP protection.

“There’s this danger they’re going to try and design you out, but that is the nature of our business. You can’t take anything for granted but you have to use those opportunities to try and work with people and drive forwards. Wherever there is growth, there always is the opportunity. We’re all fortunate to be in a market that is fundamentally growing and changing and adapting and there are so many places where we can push and find new niches. I see it as a massive opportunity for people in the west dealing with companies in China.”

On relationship-building, a proactive dialogue is required. “Having scheduled meetings every month is not enough for bonding the relationship.”

Phone calls or WeChat messages between scheduled meetings keep the conversation going.

Mr Brown illustrated the optimal perspective via an Arm-based anecdote.

He said: “Once we licensed something to a major Asian OEM and very quickly we learned of a parallel activity within that customer that was clearly illegal. Through personal relationships and persuasion, we convinced them this was a really bad idea for our future together. But it’s only by knowing what’s happening on the ground so your intelligence of what’s happening in your customer base is really important and it comes back to this issue that you’ve really got to double down on the efforts of communication both within your own people and then into your customer base to try and understand what’s happening.”

He concluded: “The most important thing is to give back more time and communicate more frequently. Every little bit helps!”