Silicon Valley Legal Bible（18）Anatomy of NVIDIA's Global Shareholding Structure
Similar to Zoom, NVIDIA is one of today's international giants with Chinese genes. At a glance, you can see that NVIDIA has a Delaware-based structure similar to Zoom. So let's take a look at what makes NVIDIA's architecture different compared to Zoom's, and why.
The Silicon Valley Book of Forty-Two Chapters, a legal encyclopaedia for founders. I'm Liu Xiaoxiao, a U.S. attorney, and I'm here in Silicon Valley to provide you with an in-depth explanation of the legal logic behind entrepreneurship.
1. Why are there two Singapore companies?
Compared to the Zoom structure, we will find two Singaporean companies in NVIDIA's structure, but these two Singaporean companies have different businesses.
NVIDIA Singapore Development Pte. Ltd. has been in the PC gaming, computer graphics, modern artificial intelligence, and meta-universe business since its inception in 1993.
NVIDIA Singapore Pte Ltd. was established in May 2000 and specialises in the manufacture of computer printers, monitors, keyboards, mice, webcams, as well as ATMs, kiosks, point-of-sale terminals, and biometric readers.
Just to be clear, don't be surprised to learn that this is a "private limited company". All companies in Singapore are called PTE, Private Limited.
NVIDIA established two companies in Singapore, mainly because NVIDIA (NVIDA) business needs are more diversified, there is indeed a need to establish a number of different companies, so in Singapore on the establishment of two. Of course, these two companies also have something in common, that is, in the whole structure to play the role of talent centre, R & D centre.
2. Why Mauritius
In addition, we will see that NVIDIA also has a Mauritius company, which is not common in the structure of major multinational companies.
Mauritius, known as "Switzerland in Africa", is one of the few rich countries in Africa, but also has a wealth of business opportunities exemption from corporate income tax, personal income tax, capital gains tax, stamp duty and asset tax and other taxes, the main body of the company can be used to buy and sell property, property, there is no foreign exchange control, support for the free entry and exit in both directions, you can use the currency of many countries for transactions. Many countries' currencies can be used for transactions.
In addition, Mauritius is also very suitable for offshore companies as a place to choose, so here we see Mauritius is a holding company, subordinate to a Shenzhen, two Shanghai companies is the actual operating body, so here in Mauritius with our common British Virgin Islands (BVI) or the Cayman Islands (Cayman Island) there is no difference. As to why NVIDIA (NVIDA) with Mauritius rather than other offshore companies, we will have a special video to analyse the advantages and disadvantages of the various offshore company resorts, not to expand today.
3. Why set up a company in the Virgin Islands
In a VIE structure, a typical British Virgin Islands (BVI) company will act as the uppermost shareholding company, with each founder coming in with one, and then co-shareholding the Cayman company that is the subject of the listing. But in the structure of NVIDIA (NVIDA), we see that obviously not so, Delaware company is above the direct shareholding of various shareholders, while in the structure of NVIDA (NVIDA), the British Virgin Islands NVIDIA Corporation (NVIDIA BVI Holdings Limited) is the U.S. head office is 100 per cent holding.
We will note that here in the British Virgin Islands (BVI) is a branch in Taiwan, called the British Virgin Islands NVIDIA Holdings Limited Taiwan Branch (NVIDIA (BVI) Holdings Limited Taiwan Branch), note that it is a branch, not a subsidiary Oh. And in addition to this British Virgin Islands (BVI) company to open a branch in Taiwan, NVIDIA (NVIDIA) also through its NVIDIA Singapore Development Pte Ltd (NVIDIA Singapore Development Pte Ltd) in Taiwan set up NVIDIA Singapore Development Pte Ltd Taiwan Branch (NVIDIA Singapore Development Pte. Ltd. Taiwan). Ltd. in Taiwan through its NVIDIA Singapore Development Pte Ltd, and through NVIDIA Hong Kong Holdings Limited in Taiwan through NVIDIA Hong Kong Holdings Ltd. Branch) in Taiwan through NVIDIA Hong Kong Holdings Limited. In fact, this overseas to establish a head office, and then set up a branch in Taiwan is a relatively common practice in the practice of Taiwan's corporate law, as if we Chinese people like to open a company to engage in a set of red-chip structure, the specific reasons will not be expanded, it is Taiwan's legal system down the results of the combination of various legal systems.
As for why these NVIDIA (NVIDA) overseas companies are set up in Taiwan, everyone should know it, Taiwan is the founder of Huang Jen-Hsun's hometown, but also NVIDIA (NVIDA) is an important strategic place, 2023 NVIDIA (NVIDA) also announced that it invested 24.3 billion yuan in Taiwan to set up an AI research and development centre, and its OEM factory in Taiwan.
4. Why not set up a Wholly Foreign Owned Enterprise (WFOE) under a Hong Kong company?
In our typical VIE structure, the offshore company will set up a Wholly Foreign Owned Enterprise (WFOE) in mainland China through Hong Kong, but it is obvious that NVIDIA's structure does not do so, and the companies in Beijing, Shanghai, and Shenzhen are held by Singaporean companies and Mauritian companies respectively. The Beijing, Shanghai and Shenzhen companies are held by Singaporean and Mauritian companies respectively. When we talked about the Zoom structure, did we also tell you why most of the wholly foreign owned enterprises (WFOEs) in China in the Zoom structure are not held by Hong Kong companies? Then we have to understand the reason for setting up a Hong Kong entity in the VIE structure. It is because of the tax agreement between the Mainland and Hong Kong, right, so that the revenue generated by the Mainland company can pay less tax when entering Hong Kong. But if the mainland company it is purely a cost centre, not making money only spend, then the existence of the Hong Kong company is meaningless, right?
5. Differences between NVIDA and the Zoom architecture
As we said at the beginning, NVIDA uses the Delaware-based Zoom architecture. So what are the differences between the two?
Most of the Zoom development team is from China, with Suzhou, Hangzhou, Shanghai, and Hefei being the main regions, and China accounting for about 30% of the total workforce, but less than 10% of NVIDA's global workforce is from Taiwan and China. There are four main reasons for this:
(1) Software and hardware: Zoom is a pure software company, and everything is online, so it's easy to work remotely. NVIDIA (NVIDA) semiconductor chips, hardware, or a lot of offline face-to-face cooperation.
(2) technical difficulty. Zoom we all know, technically there is no great difficulty, with the previous Skype or something not materially different, so the success of Zoom more rely on optimisation, rather than disruptive innovation, we will find that our Asian entrepreneurs are better at optimisation of entrepreneurship, or called the improvement of entrepreneurship. For example, Roborock launched a sweeping and mopping robot based on the American Roomba sweeping robot. There are also electric cars originally invented by the Americans, and then Chinese brands directly added massage machines, mahjong tables and so on to the electric cars. Can't do it without me, but can do it with me. This kind of work to the Asian countries is the most appropriate. And NVIDIA (NVIDA) to do a lot of things are unprecedented innovation, then or to the United States, is currently the United States is still the top engineers most gathered place.
(3) National Security. The previous issues of video we have repeatedly analysed the United States introduced one after another restrictive policies on China, in fact, the core content is national security, and semiconductors in each of these restrictive policies are at the top of the list. It is also because of the high precision of the semiconductor industry mentioned earlier, in accordance with U.S. national security requirements, a lot of work can not be put overseas.
(4) Localisation. This part is the corporate culture programme factors, Jen-Hsun Huang came to the United States when he was 9 years old, basically can be regarded as half of the Americans, for the U.S. local resources have been used to the stove, NVIDIA (NVIDA) is also like a U.S. companies, and Zoom's founder Yuan Zheng undergraduate study in Shandong Institute of Mining (today's Shandong University of Science and Technology), the master's degree first in China University of Mining and Technology, and after the MBA degree from Stanford University. He received an MBA degree from Stanford University, which is still more like most of our students who stayed in the US, so he still has this inertia thinking, and his dependence on the resources of his hometown is still relatively strong.
The Silicon Valley Treasure Book of Forty-Two Chapters, a legal encyclopaedia tailored for founders. I'm Liu Xiaoxiao, a U.S. attorney, and I'll see you in the next issue.
