The global semiconductor industry is experiencing turbulent waves, with two chip giants $Arm Holdings (ARM.US)$N/A.$Qualcomm (QCOM.US)$Positive confrontation.

Affected by this, Qualcomm's pre-market trading on the US stock market fell by nearly 4%.

Arm's pre-market trading on the US stock market fell more than 3%.

The mobile phone and AI PC markets may be affected.

According to Bloomberg, Arm has issued a mandatory notice to its long-term partner Qualcomm to cancel the Technology License Agreement (TLA), stating that if the two parties cannot resolve the dispute, the latter's design architecture authorization will be canceled within 60 days.

Qualcomm is the largest manufacturer of smart phone processors and modems, while Arm is one of the most influential chip companies globally.

The conflict between the two may disrupt the smart phone and personal computer markets, impacting the financial and operational aspects of both parties.

Every year, Qualcomm sells billions of processors for use in the majority of Android smart phones.

If the termination agreement with Arm takes effect, Qualcomm may have to stop selling most of the products contributing to its approximately $39 billion revenue, or face massive lawsuits.

On the surface, the conflict between Arm and Qualcomm stems from a previous acquisition.

In 2021, Qualcomm spent $1.4 billion to acquire Nuvia, a chip design startup that was also an Arm authorized customer.

After the acquisition, Nuvia played a key role in Qualcomm's business, with its developed Oryon architecture integrated into Qualcomm's AI PC chip product line.

Earlier this week, Qualcomm also announced plans to introduce the second generation Oryon architecture into their more widely used smart phone Snapdragon chip.

However, this has also sparked licensing disputes between Arm, Qualcomm, and Nuvia.

Arm stated that Qualcomm did not negotiate a new licensing agreement after acquiring Nuvia, while Qualcomm believes that the existing agreement covers its activities with the acquisition of Nuvia.

Subsequently in August 2022, Arm took Qualcomm to court for contract violation, trademark infringement, royalty rates, and Nuvia's IP ownership.

Arm indicates that it is currently for$Microsoft (MSFT.US)$The design of the Copilot+laptop program is a direct technical descendant of Nuvia chips and the licensing of these chips has been canceled.

Regarding the issued injunction, a Qualcomm spokesperson stated: "ARM's actions are as usual - more baseless threats aimed to coerce long-term partners, disrupt our performance-leading CPUs, and raise patent rates, regardless of our extensive rights under the architecture license."

Intensifying competitive relationship.

Fundamentally, the dispute between Arm and Qualcomm stems from the increased overlap of their businesses, leading to intensified conflicts of interest.

Under the leadership of CEO Rene Haas, Arm has shifted towards providing more complete chip designs that do not require intermediaries like Qualcomm and can be directly handed over to contract manufacturers.

Meanwhile, Qualcomm is gradually moving away from using Arm designs, instead prioritizing its own designs, which may make it a less profitable customer for Arm.

Furthermore, Qualcomm is expanding into new areas like computing, while Arm is also driving the development in this sector. This means that the competition between the two intensifies and the cooperation weakens.

Editor/rice