Qualcomm’s recent Snapdragon Summit was a major showcase for the company’s new Snapdragon 8 Elite system-on-a-chip, which includes Qualcomm’s Oryon CPU, but the good vibes are souring with reports that Arm is canceling Qualcomm’s chip design license as the latest salvo in an ongoing licensing dispute between the companies.
The argument stems from Qualcomm’s 2021 acquisition of Nuvia, which brought the Nuvia-developed Oryon CPU under Qualcomm’s wing. Qualcomm is a longtime Arm licensee and one of Arm’s biggest customers, while Nuvia had its own license agreement with Arm previous to the Qualcomm acquisition–a much less lucrative one for Arm.
Jack Gold, president and principal analyst at J. Gold Associates, told Fierce Electronics, “Qualcomm maintains that since Nuvia is part of Qualcomm, their royalties are covered under the Qualcomm agreement, while Arm maintains that Nuvia had a separate deal with them and that deal needs to be in place despite the acquisition. At its core, this is a battle between [Qualcomm and Arm] for Arm to maximize its revenues while Qualcomm looks to minimize its royalty liability.”
Arm wants its agreement with Qualcomm to deliver the greatest possible licensing revenue, so the U.K. firm is giving Qualcomm 60-days’ warning that it plans to cancel Qualcomm’s license agreement, a deadline that roughly coincides with the next date–Dec. 16–that Arm and Qualcomm are due in court over legal complaints they have filed against one another over the last two years or so.
If Arm cancels the licenses, Qualcomm “would essentially be unable to produce any chips, since virtually all of their chips, and certainly all Snapdragon chips, use Arm IP,” Gold said, although the absence of revenue from Qualcomm certainly would be crippling for Arm. “In essence, both companies have a whole lot to lose here. But both also have a lot of resources so the court battle could go on for some time,” he added.
Several industry watchers have observed that Arm is looking to convince Qualcomm that a long court battle will not be worth it, and that the two companies should settle before the next court date arrives. Patrick Moorhead, founder CEO, and chief analyst at Moor Insights & Strategy, said on Yahoo! Finance’s Market Domination broadcast that he expects the dispute to be settled out of court. “None of these companies want to take this to court,” Moorhead said, explaining that it would be bad for a semiconductor industry still in the thrall of an AI boom.
Gold concluded, “It's likely we’ll see some sort of settlement given the stakes involved for both companies, but it’s not clear whether that is in the short term, or after a long drawn out court fight.”
Incidentally, both Arm and Qualcomm are scheduled to report their latest quarterly earnings on Nov. 6, and it's possible they will have more to say about this dispute during their respective earnings calls.
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