ARM to Drop Qualcomm License, Qualcomm Retorts Assertively
According to a document, Arm provided Qualcomm with a 60-day advance notice to terminate the architectural license agreement, which allowed Qualcomm to design its own chips based on the standard designs owned by Arm.
Public information indicates that over the past two years, Arm has been suing Qualcomm for breach of contract and patent infringement. In August 2022, Arm filed a lawsuit in Delaware, accusing Qualcomm of developing technology using Nuvia's assets without negotiating a new license. Qualcomm counter-sued, claiming no wrongdoing and stating that Arm could not demand the destruction of processor chip technology built using Nuvia's intellectual property.
It is important to note that Qualcomm is not only one of Arm's most significant customers but also a major force behind Arm architecture chips in the Windows ecosystem. So why would Arm want to sever ties with its largest customer?
The deterioration of the relationship between the two partners can be traced back to an acquisition deal. In 2021, Qualcomm announced the acquisition of a chip design company, Nuvia, for $1.4 billion. This transaction garnered significant attention in the semiconductor industry because all three co-founders of Nuvia were former core technical members of Apple's A-series chip team.
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Qualcomm's acquisition of this chip design team was with the hope that Nuvia could help significantly enhance the performance of the next generation of CPUs. In 2023, Qualcomm released the Snapdragon X Elite processor, whose powerful performance and efficiency not only overshadowed Intel's Core 9 but even surpassed Apple's custom M3 processor. The Nuvia team became famous overnight.
From Arm's perspective, both Qualcomm and Nuvia had licensing agreements with Arm, but after Qualcomm's acquisition of Nuvia, it used Nuvia's custom chip designs without Arm's consent, violating the previous licensing agreement. As a result, Arm demanded compensation.
Perhaps what Arm did not explicitly state is that after acquiring Nuvia, Qualcomm's future chip designs would heavily incorporate custom computing cores designed by Nuvia, rather than using Arm's standard architecture. This not only significantly improves performance but also helps Qualcomm reduce licensing fees to Arm, thereby affecting Arm's revenue streams. Apple has already extensively used custom cores in its M-series chips, and Arm does not want to see Qualcomm follow suit.
As is well-known, Arm is only responsible for designing chip architectures and does not produce or sell chips itself; all its revenue comes from technology licensing. Arm's revenue last year was only $3.23 billion, with a net profit of just $300 million, which is only a fraction of many chip giants. Therefore, Arm prefers chip manufacturers to use more of its Cortex designs and is very dissatisfied with Qualcomm's licensing fee operations after acquiring Nuvia.
This lawsuit has been ongoing for nearly two years. After Qualcomm launched the Snapdragon X Elite processor, designed by the Nuvia team, and challenged Intel's x86 processors in the Windows PC domain, Arm applied for an injunction to ban the sale of all Windows laptops based on the Snapdragon X Elite processor in the lawsuit.
Driven by the enormous growth potential brought by the AI concept, Arm's stock price has increased by nearly 150% over the past year, and its market value has also surged to tens of billions of dollars. Arm's largest shareholder, SoftBank, has made a fortune and completely emerged from the low point of a series of previous failed investments. Just four years ago, SoftBank agreed to sell Arm to Nvidia for $40 billion. This deal was only forced to be canceled due to antitrust regulatory litigation.Qualcomm and Arm, the golden partners of the smartphone era, have seen a significant rift in their cooperation as they enter the AI PC era. It is reported that MediaTek is the partner that Arm currently pins high hopes on. The two parties have been cooperating in the Chromebook field for many years, and have been preparing to build notebook chips since 2022. When Microsoft's exclusive cooperation with Qualcomm expires, MediaTek may release notebook chips based on the Arm architecture at next year's CES. Compared with Qualcomm's custom kernel design, MediaTek's use of Arm's Cortex design means that Arm can obtain more licensing fees.
Currently, Qualcomm has responded to this matter.
A spokesperson for Qualcomm responded, saying: "This is Arm's usual practice - more unfounded threats, aimed at forcibly pressuring long-term partners, disrupting our performance-leading CPU products, and ignoring the extensive rights already covered by our architectural licensing agreement to increase licensing fees. Before the upcoming court hearing in December, Arm's desperate trick seems to be trying to interfere with the legal process, and its request to terminate the licensing agreement is baseless. We are confident that the rights covered in the Qualcomm-Arm agreement will be confirmed by the court. Arm's anti-competitive behavior will not be tolerated."
A semiconductor analyst also said that Arm's practice of fighting for more licensing fees may worry Arm's other top customers, including companies such as Amazon, Samsung Electronics, and Apple. He also mentioned that Arm's lawsuit against Qualcomm, while also trying to increase patent fees, will not be well-received by many of Arm's customers.
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