After two years of unsuccessful litigation, Arm finally couldn't bear it anymore and issued an ultimatum.
Bloomberg's latest report states that Arm has issued a mandatory notice to Qualcomm to cancel its Chip Technology License Agreement (TLA), which has set an eight week deadline for the latter to resolve the dispute. It is reported that the technology license agreement originally allowed Qualcomm to directly purchase Arm's IP cores to design chips.
Regarding this, Qualcomm stated, "Using unfounded threats to disrupt customers is Arm's consistent tactic, with the aim of increasing royalty rates. However, its request to terminate the lawsuit is unfounded, and we believe that Qualcomm's rights under the agreement with Arm will be recognized
This dispute is undoubtedly a continuation of the technical ownership dispute between the two companies two years ago. Industry insiders predict that this dispute will not only disrupt the finances and operations of the two most influential companies in the chip industry, but also disrupt the entire smartphone and PC markets. Doug O'Laughlin, founder of Fabricated Knowledge, a chip financial analysis company, once commented, "This is definitely a real risk
Like many other companies in the chip industry, Qualcomm and its customers heavily rely on Arm's instruction set. If this technology license agreement is really cancelled, it will mean that Qualcomm will have to stop selling most of its products, which account for about $39 billion in revenue, otherwise it will face huge loss claims, and Arm will also have to "break away" from its second largest customer. In addition, many AI PCs, represented by Microsoft Copilot+, equipped with processors based on Qualcomm Arm architecture may also be affected.
However, recently Qualcomm has also shown a clear tendency to reduce its dependence on Arm. At the Snapdragon Summit, it launched a new generation flagship mobile processor - Snapdragon 8 Elite, which uses its self-developed architecture Oryon and is 45% faster than the previous generation, with lower energy consumption. It is worth mentioning that the Oryon core was developed by the engineering team of Nuvia, which was acquired by Qualcomm. In 2021, Qualcomm acquired the company founded by a former Apple executive for $1.4 billion. In 2022, Arm sued Qualcomm, accusing it of acquiring and using Nuvia's technology without permission.
Why can't Arm tolerate Qualcomm's "unauthorized" acquisition of Nuvia? As is well known, Arm does not produce chips itself, but grants authorization to customers and charges licensing fees and royalties based on the number of chips produced and sold by customers. Arm's authorization is divided into ALA (Architecture License Agreement) and TLA (Technology License Agreement). The former, like Apple, designs its own IP based on the Arm architecture instruction set to develop processor cores. The latter is like Qualcomm, which directly purchases Arm's IP for use, but partial modifications can also be made.
On the other hand, Nuvia holds both ALA and TLA licenses, and the performance of its "Phoenix" CPU developed based on this was regarded as a benchmark in the market at that time. Qualcomm acquires Nuvia and states that "the products and technologies developed by Nuvia under the Arm license will be incorporated into Qualcomm's extensive product portfolio. This is seen by Arm as a 'white wolf with empty hands'. Arm believes that although Qualcomm has ALA authorization, its previous attempts to design custom processors have all ended in failure, so it is unreasonable to use Nuvia's design without consent and payment.
As a result, Arm sent a letter to Qualcomm terminating the Nuvia license, demanding in the lawsuit that Qualcomm cease using the technology developed based on Nuvia ALA and provide compensation. Qualcomm, on the other hand, takes it lightly, stating that it has Arm's license agreement and therefore has the right to use related technology and promote Nuvia products, even filing a counterclaim against Arm. Both parties had constant disputes, and ultimately Nuvia's license was terminated in February 2023.
However, as Qualcomm has always been Arm's second largest customer and the two companies have deep financial ties, many investors and analysts believe that they will reach a settlement before the trial, which is scheduled to begin in December in Delaware federal court.