The litigation between Arm and Qualcomm began this week and the companies exchanged the first salvo of shots in the courtroom. As expected, Arm accused Qualcomm of breaching the contract by releasing its Snapdragon X processors for PCs with general-purpose cores designed by Nuvia, while Qualcomm accused Arm of competing with its own customers by offering complete chip blueprints for client and datacenter processors, reports Reuters.
The dispute began after Qualcomm acquired Nuvia for $1.4 billion in 2021 and proceeded with the development of its custom Armv8.2-based cores that are now used inside the Snapdragon X processors. Arm contends that Qualcomm breached its agreement by failing to renegotiate terms following its acquisition of Nuvia, as these designs require adherence to Nuvia's higher royalty rates.
As a remedy, Arm is demanding the destruction of all Nuvia designs developed prior to the merger. Qualcomm, however, argues that its architecture license agreement (ALA) fully covers Nuvia's designs. This difference in royalties has reportedly cost Arm an estimated $50 million in annual revenue, which is a lot of money for the company.
Qualcomm argues that Arm's actions are motivated by plans to compete with its customers, now that it offers CPU compute subsystems for client and datacenter processors and other use cases. In court, Qualcomm presented internal Arm documents suggesting the company considered designing its own chips, which would make it a major competitor for its own clients, including Qualcomm. René Haas, chief executive of Arm, dismissed these claims, stating that while Arm explores various business opportunities, for now it has no intentions of selling actual hardware, such as processors.
Haas also defended letters Arm sent to dozens of Qualcomm's clients, including Samsung (which uses Qualcomm-designed processors inside its smartphones and PCs), warning them about the potential fallout from the dispute. Qualcomm's attorneys described these letters as misleading, asserting they were designed to disrupt Qualcomm's relationships with its customers. Haas maintained that the letters were necessary to address questions from industry partners concerned with the litigation's implications.
Arm licenses its CPU and GPU cores as well as instruction set architecture to hundreds of clients worldwide. Allowing Qualcomm to sidestep higher royalty rates could undermine its business model, which is why it had to act aggressively. Haas described the situation as unprecedented, emphasizing that the company is focused on protecting its long-term business interests.
Qualcomm currently pays Arm approximately $300 million annually in fees, according to Bernstein analyst Stacy Rasgon. Therefore, it's crucial for Arm to ensure that Qualcomm adheres to its licensing policies. If other CPU designers follow Qualcomm, Arm's business could be hurt badly.
