Arm Holdings Cancels Qualcomm's Architectural License Amid Legal Dispute

Arm Holdings has cancelled an architectural license deal with Qualcomm, escalating the current legal spat between the two tech titans. The deal, which permits Qualcomm to create its own processors using Arm's intellectual property, has caused Qualcomm's shares to fall by more than 5 per cent in premarket trade, while Arm's US-listed shares have fallen by about 2 per cent. The legal issue is scheduled to go to federal court in December.

According to Bloomberg News, Arm Holdings, which is majority-owned by Japan's SoftBank Group, gave Qualcomm 60 days notice that their architectural license arrangement would be terminated. The license allows Qualcomm to design chips using Arm's specifications, which is an important part of Qualcomm's chip development plan.

The dispute originates from Qualcomm's 2021 acquisition of Nuvia, a chip firm, which Arm alleges broke their agreement by failing to renegotiate the license. Arm had earlier sued Qualcomm in 2022 and revoked Nuvia's licence for its chip designs, which Arm claims are used in Microsoft's future Copilot+ notebooks.

Qualcomm reacted forcefully, with a spokeswoman describing the licence cancellation as ‘more of the same from Arm—more unfounded threats designed to strongarm a long-time partner’ and ‘an attempt to disrupt the legal process’ ahead of the December trial.

Qualcomm believes that its rights under the agreement are protected and that Arm's termination suit is ‘baseless.’ Meanwhile, Arm declined to comment on the situation.

The termination of the architectural licence could have serious ramifications for Qualcomm. If Arm wins the action, Qualcomm and its partners, including Microsoft, may be obliged to suspend shipments of new laptops equipped with Qualcomm chips. This would jeopardise Qualcomm's commercial plan while also disrupting its partnerships with big technology companies such as Microsoft.

Furthermore, the case might unravel one of Qualcomm's greatest strategic moves in recent years: the acquisition of Nuvia, which was intended to strengthen its position in high-performance computing chips. A negative ruling for Qualcomm could result in increased costs and higher royalty fees for chip designs.

Despite the heightened tensions and public pronouncements from both firms, some analysts and investors are hopeful that Qualcomm and Arm will reach an agreement before the trial begins in December. Given their interdependent commercial relationship in which Qualcomm relies on Arm's chip architecture and Arm profits from Qualcomm's usage of its intellectual property a pre-trial resolution is viewed as the obvious consequence to avoid additional market disruption.