A joint venture involving Arm Holdings and its Chinese partners reportedly went into operation at the end of April, with the unit taking over the British chip company's operations in China.
There are also plans for an initial public offering on one of the country's stock exchanges, Nikkei reports.
Arm mini China, as the unit will be called, is officially registered in the southern Chinese city of Shenzhen and is 51% owned by Chinese investors, including state-backed entities, with Arm controlling the remaining 49%. It will be responsible for handling all the licensing and royalties business with local partners.
Arm's chip blueprint is used in roughly 90% of mobile devices globally. Companies including Apple, Samsung Electronics, Huawei Technologies, Qualcomm, Broadcom, MediaTek and many others all need to license technology from Arm to develop chipsets.
The creation of Arm mini China could allow the Chinese government develop its own semiconductor industry, cut reliance on foreign suppliers and gain control of sensitive chip technologies that come with national security implications.
A number of semiconductor deals involving Chinese funds have been blocked by the U.S. government on security grounds. Recently, the U.S. moved to ban Chinese smartphone maker ZTE from using American components and is investigating its larger peer Huawei Technologies.
Hopu-Arm Innovation Fund, also known as Hou An Innovation Fund, will be a key stakeholder in the venture.
The fund's backers include Chinese sovereign wealth fund China Investment Corporation, the Beijing-owned Silk Road Fund, Singaporean sovereign wealth fund Temasek Holdings, Shenzhen government-owned conglomerate Shum Yip Group, and Hopu Investment Management, according to China's Ministry of Science and Technology.