Arm Holdings (ARM) is canceling a crucial license that has allowed Qualcomm (QCOM) to use Arm’s intellectual property to design its chips, according to an exclusive Bloomberg report. Arm’s move will escalate its ongoing legal battle with Qualcomm.
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According to the report, Arm has given the chip giant a mandated 60-day notice to terminate Qualcomm’s architectural license agreement. The ongoing tussle between the two chip companies threatens to shake up the smartphone and personal computer markets. Qualcomm’s contract with Arm has enabled it to create chips based on Arm’s technology, which is a vital element in the production of chips for Android smartphones.
What Could the Cancellation of This Technology Mean for QCOM?
The consequences of this cancellation could be severe for Qualcomm. As a major supplier of semiconductors, Qualcomm’s revenue is significantly dependent on this technology. If Arm cancels the contract, Qualcomm may be forced to stop selling its key products or face significant legal repercussions.
Qualcomm, for its part, sees this move as an attempt by Arm to disrupt the legal process. A QCOM spokesperson told Bloomberg, “It appears 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.”
Why Did Arm Sue QCOM in 2022?
This latest action intensifies a legal dispute between the two companies that began in 2022 when Arm sued Qualcomm for breach of contract and trademark infringement.
This dispute centers on Qualcomm’s acquisition of Nuvia, an Arm licensee, in 2021. Arm argues that Qualcomm failed to renegotiate contract terms following the Nuvia acquisition, while Qualcomm maintains that the existing agreement covers Nuvia’s operations. Nuvia is a chip-design startup whose work on microprocessor design has become central to the PC chips that Qualcomm sells to PC companies.
In fact, earlier this week, QCOM announced plans to incorporate Nuvia’s design into its Snapdragon chips for smartphones. Arm claims that Qualcomm’s use of Nuvia designs breaches its license agreement and is demanding the destruction of those designs created before Qualcomm acquired Nuvia. According to the original lawsuit filed by Arm in the U.S. District Court in Delaware, these designs cannot be transferred to Qualcomm without Arm’s approval.
Is QCOM Stock a Good Buy?
Analysts remain cautiously optimistic about QCOM stock, with a Moderate Buy consensus rating based on 12 Buys, eight Holds, and one Sell. Over the past year, QCOM has surged by more than 60%, and the average QCOM price target of $214.13 implies an upside potential of 23.6% from current levels.
