Arm Holdings Plc has terminated a crucial license that allowed its longtime partner, Qualcomm Inc., to design custom chips using Arm’s intellectual property.
The decision, revealed by insiders and first reported by Bloomberg, marks a significant escalation in an ongoing legal battle between the two semiconductor giants.
Arm, a UK-based company, has given Qualcomm a 60-day notice of the cancellation, which could have far-reaching consequences for the smartphone and personal computer markets.
Background of the Dispute
The tension between Arm and Qualcomm began in 2022 when Arm filed a lawsuit accusing Qualcomm of breach of contract and trademark infringement.
The dispute centers around Qualcomm’s 2021 acquisition of Nuvia, a chip-design startup that held its own Arm license. Arm argues that the purchase required Qualcomm to renegotiate terms, but negotiations broke down, leading Arm to terminate Nuvia’s licenses in early 2023.
The ongoing legal battle will come to a head with a trial scheduled for December 16, 2024.
Stakes for Qualcomm and the Broader Tech Industry
Qualcomm is one of Arm’s biggest customers and a major player in the smartphone industry, selling hundreds of millions of processors annually.
The cancellation of the architectural license agreement could jeopardize Qualcomm’s ability to design custom chips using Arm’s technology, potentially disrupting Qualcomm’s $39 billion revenue stream.
As the holder of a core instruction set used by most mobile electronics, Arm’s decision may lead to claims for substantial damages against Qualcomm if a resolution is not reached.
While Arm’s move primarily affects Qualcomm’s custom chip designs, the company would still have access to standard Arm blueprints under separate agreements.
However, this would entail significant delays and disruptions to Qualcomm’s ongoing projects, including its AI-focused Snapdragon chips designed using Nuvia’s technology.
Need Career Advice? Get employment skills advice at all levels of your career
Response and Reactions
Qualcomm has dismissed Arm’s decision, accusing the British firm of attempting to manipulate the legal process.
A Qualcomm spokesperson said the termination claim is “baseless,” adding that the company remains confident in its rights under the existing agreement.
Representatives for Arm declined to comment publicly on the matter.
Industry analysts believe Arm’s move is a strategic play to gain leverage before the December trial.
Intelligence analysts Tamlin Bason and Kunjan Sobhani anticipate a negotiated settlement between the two companies, likely resulting in higher royalty rates for Qualcomm to continue using Arm’s technology.
Strategic Shifts and Market Implications
Under CEO Cristiano Amon, Qualcomm has been shifting its strategy away from reliance on Arm’s designs, focusing instead on its in-house technology.
The company’s acquisition of Nuvia plays a critical role in its expansion into computing and AI-focused devices, making the current licensing dispute all the more significant.
Qualcomm has already introduced Nuvia’s “Oryon” design into its Snapdragon chips, which are set to power a new generation of AI-driven laptops.
Meanwhile, Arm, under CEO Rene Haas, is pushing for a more lucrative business model by offering more comprehensive chip designs that can be manufactured directly.
This approach puts Arm in more direct competition with its traditional customers, including Qualcomm, as both companies look to expand into new areas like computing and AI.
The Path Forward
The outcome of this dispute could have major implications for the tech industry, particularly in the semiconductor and smartphone markets.
With both companies pursuing competing strategies and the trial looming, the future of their partnership remains uncertain.
Analysts expect some form of negotiation to occur, but at a potentially steep cost for Qualcomm in terms of increased royalties or restrictive conditions.
As the legal battle continues, all eyes are on how Arm and Qualcomm navigate this escalating conflict, which could reshape their relationship and influence the broader semiconductor market for years to come.
