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SoftBank’s Arm has told US chipmaker Qualcomm it will cancel its chip design licence, raising the stakes in an intellectual property dispute set to go to trial in December.
Qualcomm confirmed the move on Tuesday, accusing Arm of “strong-arm” tactics designed to increase royalty rates for its intellectual property, which will “disrupt the legal process” under way in the US.
Many of Qualcomm’s chips use Arm’s design architecture, meaning a revocation of its licence potentially puts billions of dollars of revenue at risk.
The relationship between the two companies soured in 2022, when Arm sued Qualcomm, one of its biggest customers, over its $1.4bn acquisition of chip design group Nuvia.
Arm claims the deal led to the use of its intellectual property without its permission, allegations Qualcomm denies. The litigation has shone a light on its complicated licensing arrangements for its chip design architectures.
Arm on Wednesday said: “Following Qualcomm’s repeated material breaches of Arm’s license agreement, Arm is left with no choice but to take formal action requiring Qualcomm to remedy its breach or face termination of the agreement.”
Qualcomm on Tuesday said Arm’s justification for terminating the licensing contract was “completely baseless”.
It added: “This is more of the same from Arm — more unfounded threats designed to strong-arm a longtime partner, interfere with our performance-leading CPUs, and increase royalty rates regardless of the broad rights under our architecture licence.”
Qualcomm shares fell more than 4 per cent on Wednesday, and Arm’s stock was down more than 7 per cent.
The high-stakes clash between two of the world’s most prominent chip companies comes as both are riding a wave of optimism around artificial intelligence. Their shares have risen higher this year, driven by expectations that new generative AI applications such as virtual assistants will boost hardware sales.
The news of the legal document sent to Qualcomm was first reported by Bloomberg. Arm’s move triggers a mandatory 60-day period for the US chipmaker to respond before the licence is revoked.
UK-based Arm, acquired by Japan’s SoftBank in 2016, made its blockbuster debut on Nasdaq in September last year. The company’s chip designs are used by a wide range of companies including Nvidia and Apple.
Qualcomm announced a new processing chip for mobile phones, the “Snapdragon 8 Elite”, at its annual tech summit this week. Earlier this year, it unveiled a line of CPU chips for a new generation of AI-enabled PCs based on Arm’s architecture.
Chief executive Rene Haas has described Arm as the “most ubiquitous computer architecture on the planet”. It competes with X86, the architecture used by Qualcomm rivals Intel and AMD.
The patent fight with Qualcomm is due to go to trial in Delaware on December 16.
