Qualcomm Inc. (NASDAQ:QCOM) has been threatened by Arm Holdings Plc. (NASDAQ:ARM) with cancelation of its chip design license, leaving the San Diego-based semiconductor giant with 60 days notice.
What Happened: The architectural license agreement allows Qualcomm to make its chips based on Arm's standards. The showdown may potentially threaten the personal computers and the smartphone market, Bloomberg reported, citing a document.
Every year, Qualcomm sells hundreds of millions of chips, which are the brains behind most Android smartphones and tablets. The chipmaker may have to stop selling products that generate a large portion of its around $39 billion in sales if the cancelation goes into force, or it may be subject to claims for significant damages, according to the report.
Qualcomm's 2021 acquisition of another Arm licensee and its alleged failure to renegotiate contract conditions are at the heart of the dispute. Qualcomm contends that the operations of the chip-design firm Nuvia, which it acquired, are covered by its current agreement.
According to Qualcomm, the SoftBank Group-backed British business was attempting to "strong-arm a longtime partner." It seems to be an attempt to disrupt the legal process, and its claim for termination is completely baseless. "We are confident that Qualcomm's rights under its agreement with Arm will be affirmed," the spokesperson said, according to the report.
Qualcomm and Arm did not immediately respond to Benzinga's request for comment.
Why It Matters: On Monday, Qualcomm unveiled its latest high-end smartphone SoC, the Snapdragon 8 Elite, which boasts a new Oryon CPU and enhanced AI capabilities.
Qualcomm's Snapdragon 8 Gen 4 shipments are expected to rise 50% in late 2024, driving significant revenue and profit growth. Analyst notes Qualcomm poised for gains from AI smartphone growth and rising SoC prices, despite Apple Inc.'s 5G chip efforts.
In early October, Honeywell International Inc. expanded its collaboration with Qualcomm to create new AI-enabled solutions for the energy sector.
Price Action: On Tuesday, Qualcomm's shares ended the day up 2.47% at $173.18. After-hours trading saw a modest uptick in the stock, which was 0.0058%. Qualcomm's shares have surged 23.50% so far this year.
Arm Holdings PLC, on the other hand, closed the trading day up 0.15% at $152.58. However, the price fell 0.12% during after-hours trade. Arm has increased by 121.39% so far this year, according to data from Benzinga Pro.
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