Arm Threatens To Nuke Global Mobile Market By Canceling Qualcomm’s Chip Design License

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British chip design Arm Ltd has purportedly thrown a spanner in the global smartphone industry by warning semiconductor design giant Qualcomm that it will cancel Qualcomm’s chip design license as part of a dispute between the two that dates back to 2022, reports Bloomberg. Arm refused to comment on the report, with Qualcomm accusing the firm of trying to strong arm it. Arm’s chip designs sit at the heart of the multi billion dollar global smartphone industry as its processors are used in smartphones of all performance ranges.

The firm remained confident it would walk away from the termination without facing any disruption as the two firms spar on whether Qualcomm should have renegotiated an acquiree’s Arm license following a successful takeover in 2021.

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Qualcomm, which earned $18.8 billion in revenue from smartphone sales during the nine months ending June, has long sought to diversify its business away from smartphones. Any macro induced weakness in consumer spending hits the firm’s shares hard, and the stock struggled in 2023, particularly due to weak spending in China.

One way Qualcomm has sought to diversify is by acquiring startup Nuvia in 2021 to try to capture a portion of the laptop market that had recently been disrupted by Apple. Apple launched its M1 processors for the MacBook in 2020 to mark the first processor change to its laptops in 14 years.

Back then, Arm had argued that Qualcomm’s Nuvia acquisition meant that the latter’s licenses for chip design were ineligible for transfer unless permitted by Arm. Consequently, Arm had sued Qualcomm in court, and today’s report from Bloomberg suggests that Arm has sent a 60 day standard notice to Qualcomm that it will cancel the latter’s license.

Arm, which doesn’t disclose its smartphone revenue, saw 28.6 billion chips using its designs shipped in 2023. A spar with Arm that might lead to a license cancelation would harm the firm significantly at a time when it claims to command more than 99% of the $30 billion mobile application royalty market. Mobile is Arm’s bread and butter, and the firm also claims to command a 64% share of the $18 billion tertiary mobile applications royalties market.

While Arm refused to comment to Bloomberg, Qualcomm remained “confident that [its] rights under its agreement with Arm will be affirmed.” It characterized Arm’s actions as “an attempt to disrupt the legal process, and its claim for termination is completely baseless,” adding that the firm was attempting to “strong-arm a longtime partner.”

With the pressure increased on Arm to grow revenue after its public offering, the firm has sought to expand its business to directly allow customers to use its designs in their consumer or business products. This has placed it at odds with firms like Qualcomm, which rely on Arm’s designs to manufacture chips and sell them to companies like Nokia and Samsung. Arm’s designs have also become prominent due to TSMC’s rapid advances in chip manufacturing technology, as they’ve allowed mega cap firms like Amazon to design custom data center chips.