Sep 6, 2022 - Technology

What's behind the big Arm-Qualcomm lawsuit

Illustration collage of a computer chip set amongst graphic shapes and close-up crops of a one dollar bill

Illustration: Annelise Capossela/Axios

Arm's lawsuit against Qualcomm, filed last week, is something of a head-scratcher. Sources tell Axios that, while the dispute is mostly about dollars, it's complicated by just how much money is at stake and the fact that the two companies remain dependent on one another.

Why it matters: The profoundly essential chip industry operates via a complex web of licensing agreements, and lawsuits like this — though not unheard of — mark a rare breakdown in business as usual.

Catch up quick: Arm sued Qualcomm last week, alleging that Qualcomm breached its contractual duties after it bought chip startup Nuvia.

  • Qualcomm and Nuvia both have licenses to use Arm's chip designs, but Qualcomm's terms are seen as much more favorable than Nuvia's given its huge volumes and the fact that its contracts date back many years.
  • Qualcomm would likely prefer to simply include any use it makes of Nuvia's technology under its existing terms with Arm. Arm says Qualcomm needs to negotiate a whole new deal.
  • There's a lot more wrinkles, but that's the heart of the fight.

The big picture: Qualcomm is one of Arm's biggest customers, if not the biggest. Nearly all its major chips use Arm's technology in one way or another.

But there is little love lost between the two companies.

  • Arm wishes Qualcomm would pay higher royalties, while Qualcomm would love to avoid having to write big checks to Arm at all.

Between the lines: There's even more to the animosity than that, sources tell Axios.

Arm is still smarting from the collapse of its deal to sell itself to Nvidia, and Qualcomm helped successfully lobby against that deal.

  • That, in addition to Qualcomm's Nuvia purchase, took what was already one of the coolest partnership relationships in Arm's universe and put it in the deep freeze.

Also, Apple looms large behind all these players.

  • Apple is suing Nuvia founder Gerard Williams III, a former Apple employee, arguing that he planned Nuvia's technology and recruited other Apple employees while still working for the iPhone maker. Nuvia, which initially aimed to sell chips for use in servers, had yet to bring products to market before selling to Qualcomm.
  • Qualcomm has talked about using Nuvia's technology more broadly, including to help power laptop chips that could compete with Apple's hugely successful M-series processor.
  • That gives Apple some aligned interests with Arm, especially since Arm is suing to force Qualcomm to destroy any technology that emanates from Nuvia and uses Arm's technology. Apple would be very happy if Nuvia's technology never saw light of day.

Nuvia could help Qualcomm become more independent of Arm, financially and technically.

  • Prior to buying Nuvia, Qualcomm had given up on an effort to design its own processor cores, switching back to Arm's off-the-shelf designs.
  • That arrangement is typically a more lucrative type of license for Arm.

The bottom line: Billions of dollars are at stake, depending on what happens to the Qualcomm-Arm relationship.

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