On October 23, the "Star Daily" reported that after two years of unsuccessful litigation, Arm finally issued a final warning in frustration.

Bloomberg's latest report pointed out that Arm has issued a mandatory notice to Qualcomm to cancel the chip technology license agreement (TLA), giving the latter an eight-week deadline to resolve the dispute. It is reported that the original technology license agreement allowed Qualcomm to directly purchase Arm's IP cores to design chips.

In response, Qualcomm stated: "Using baseless threats to interfere with customers is Arm's consistent tactic, aimed at increasing royalty rates. However, their request to terminate the lawsuit is groundless, and we believe that Qualcomm's rights under the agreement with Arm will be affirmed."

This dispute is undoubtedly a continuation of the technical ownership dispute that arose between the two companies two years ago. Industry experts believe 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 smart phone and PC market. Doug O'Laughlin, the founder of chip financial analysis company Fabricated Knowledge, previously commented: "This is definitely a real risk."

Like many other companies in the chip industry, Qualcomm and its customers are heavily reliant on Arm's instruction set. If this technology license agreement is indeed canceled, it means that Qualcomm will have to stop selling most of its products, generating around 39 billion dollars in revenue, to avoid facing massive loss claims. Arm will also have to face a "breakup" with its second largest customer. In addition, AI PCs featuring processors based on Qualcomm Arm architecture, such as Microsoft Copilot+, may also be affected.

However, recently Qualcomm has shown a clear tendency to reduce its dependence on Arm, launching a new generation flagship mobile processor, Snapdragon 8 Elite, at the Snapdragon Summit. This chip uses a self-developed architecture called Oryon, which is 45% faster and more energy-efficient than the previous generation. It is worth mentioning that the Oryon core was developed by the engineering team of Nuvia acquired by Qualcomm. In 2021, Qualcomm acquired this company founded by former Apple executives for 1.4 billion dollars. In 2022, Arm sued Qualcomm, accusing them of unauthorized acquisition and use of Nuvia's technology.

Why couldn't Arm tolerate Qualcomm's "unauthorized" acquisition of Nuvia? It is well known that Arm does not produce chips themselves, but grants licenses to customers. Based on the quantity of chips produced and sold by customers, Arm collects licensing fees and royalties. Arm's licenses are divided into ALA (Architecture License Agreement) and TLA (Technology License Agreement). The former, like Apple, designs IPs based on Arm architecture to develop processor cores. The latter, like Qualcomm, directly purchases Arm's IPs, although modifications can also be made.

On the other hand, Nuvia also holds ALA and TLA licenses, and its "Phoenix" CPU performance developed based on this was regarded as a benchmark in the market at that time. Qualcomm acquired Nuvia, stating that "products and technologies developed by Nuvia under the Arm license will be integrated into Qualcomm's extensive product portfolio." This was seen by Arm as a "wolf in sheep's clothing". Arm believes that although Qualcomm has the ALA license, Qualcomm's previous attempts to design custom processors have all ended in failure, so it is unreasonable to use Nuvia's design without consent and compensation.

As a result, Arm sent a letter to Qualcomm terminating the Nuvia license, requesting Qualcomm to stop using technology developed based on Nuvia's ALA, and to provide compensation in the lawsuit. Qualcomm, on the other hand, ignored this and claimed to have Arm's licensing agreement, therefore having the right to use the relevant technology and promote Nuvia's products, and even counter-sued Arm. The dispute continued, and eventually Nuvia's license was terminated in February 2023.

However, as Qualcomm has always been Arm's second-largest customer, the two companies have deep financial roots. Many investors and analysts believe that they will reach a settlement before trial. The trial is scheduled to begin in December this year at the federal court in Delaware.

Editor/Lambor