The lawsuit between British chip design giant Arm and American chip manufacturer Qualcomm was heard in the Delaware Federal Court on December 16th local time.
Since Snapdragon 835, Qualcomm has been using Arm's publicly available version of the kernel to develop chips and is one of Arm's largest customers. But in 2021, Qualcomm acquired a CPU company called NUVIA at a high price, and NUVIA chips are based on Arm's authorization, which became the trigger for the conflict between the two companies.
In the second half of this year, Qualcomm launched a series of chip products based on NUVIA design, which are applied to smartphones, AIPC, and intelligent driving. In October, Arm claimed that it would revoke Qualcomm's right to use Arm's IP to design chips and appeal to the court for trial.
From the previous statements of both parties, Arm believes that Qualcomm's unauthorized use of NUVIA's customized chip design violates the authorization agreement between the two parties. Qualcomm believes that the agreement previously signed with Arm already includes the right to independently customize any central processing unit (CPU), and Arm is actually attempting to interfere with Qualcomm's technological innovation.
In court, both parties reiterated their respective positions once again. Among them, Arm requested Qualcomm to destroy NUVIA's design and did not demand compensation for property damage. Qualcomm believes that Arm's technology is outdated.
It is reported that Arm General Manager Rene Haas, Qualcomm CEO Cristiano Amon, and NUVIA founder Gerard Williams will all attend the week-long trial. The reporter attempted to contact Qualcomm and Arm, but as of press time, no response has been received.
According to Arm's latest financial report (June 1, 2024 to September 30, 2024), Arm's revenue reached a historic high of $844 million, with licensing revenue of $330 million, a year-on-year decrease of 15%, and royalty revenue of $514 million, a year-on-year increase of 23%. Authorization income is a one-time cost for purchasing Arm's IP for chip development, which Arm updates periodically. Customers who want to use the latest version must pay again. Royalty income refers to the commission that Arm charges a certain percentage after the customer's chip products are sold. Although Arm's royalty income continues to increase, there are reports that the company is strengthening its licensing business, increasing its profit margin, and reducing its dependence on royalty income.
X86, Arm, and Risc-V are the three mainstream processor architectures internationally, but their business models differ. X86 was launched by Intel, and later AMD also joined the X86 camp. Currently, it is mainly used for the company's own products and only adopts a one-time permanent license model for some third parties. Risc-V adopts a completely open source approach, which allows developers to develop without paying. Arm adopts two business models, royalties and licensing, and opens up licensing to numerous chip design companies.
Currently, the application areas and development levels of the three major architectures are different. X86 has the longest development time and is widely used in fields such as general servers and personal PCs. Arm is rapidly developing in popular fields such as AI and new energy vehicles, and has the potential to penetrate into X86 application areas. Risc-V developed the latest, but due to its open-source and free nature, it has great potential for future growth.
The outcome of this case will not only have significant business impacts on Arm and Qualcomm, but may also affect the entire industry environment and impact the supply chains of both parties. If Qualcomm is unable to supply the latest chips, it will not only affect the company's business development trajectory, but also affect the supply of terminal products to downstream customers, including Microsoft. If Arm's appeal fails, it will be a blow to its unique business model.