Arm sues Qualcomm, aiming to divest Qualcomm’s $1.4 billion purchase of Nuvia

Qualcomm logo during the Munich Motor Show, IAA Mobility 2021 in Munich, Germany, September 8, 2021. REUTERS / Wolfgang Rattay

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SAN FRANCISCO (Reuters) – Chip technology company Arm Ltd., owned by Softbank Group Corp (9984.T), said on Wednesday it has sued Qualcomm Inc (QCOM.O) and Nuvia Inc, which was recently acquired by Qualcomm. for breach of licensing agreements and trademark infringement.

Arm is seeking an injunction requiring Qualcomm to destroy designs developed under Nuvia’s licensing agreements with Arm. Armalleged’s approval was needed before it could be transferred to Qualcomm.

Qualcomm, which acquired Nuvia for $1.4 billion last year, said Arm had no right to interfere with Qualcomm or NUVIA’s innovations. “Arm’s complaint ignores the fact that Qualcomm has broad and well-established licensing rights covering CPUs designed specifically for it, and we are confident that these rights will be asserted,” Anne Chaplin, Qualcomm’s general counsel, said in a statement.

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If Arm’s efforts succeed, it will essentially undo Qualcomm’s largest strategic acquisitions in recent years. Read more

The lawsuit marks a major rupture between Qualcomm and Arm, one of Qualcomm’s most important technology partners. Qualcomm has relied on Arm since it stopped designing its own custom computing cores. But in recent years, the companies have been at odds.

Some within Qualcomm in particular have complained that the pace of Arm innovation is slowing, causing Qualcomm chips to lag behind Apple processors in performance.

It bought Qualcomm Nuvia, founded by former Apple chip engineers, to restart its efforts to create custom computing cores that differ from the standard Arm designs used by competitors such as MediaTek Inc. (2454.TW) Taiwanese.

One of Qualcomm’s first goals with Nuvia technology is to challenge Intel Corp (INTC.O) and Advanced Micro Devices Inc (AMD.O). In the PC and laptop markets they dominate now. Qualcomm acquired Nuvia shortly after Apple ditched Intel to start using its own chips, also based on Arm technology, in its Mac laptops.

Apple’s move has revitalized Mac sales, and Qualcomm CEO Cristiano Amon told Reuters he wants to use Nuvia’s arm-based designs to do the same for the Windows laptop market. Arm will still make more money because Qualcomm pays it a fee for every chip it sells that uses its technology. But royalty rates will likely be lower under Nuvia’s deal with Arm.

Bob O’Donnell of TECHnalysis Research said the arrangement highlights how dependent the two companies are on each other.

“Qualcomm’s opportunity to move forward in the PC (and possibly server) business depends entirely on Nuvia’s designs, and Nuvia is the primary vehicle through which Arm can get into Windows PCs. So companies really need to partner well if they’re They want to have a significant impact on the PC market.”

The deal was seen as a way for Qualcomm to reduce its reliance on Arm. In the past, most Qualcomm chips used computing cores licensed directly from Arm, while Nuvia cores used Arm’s core architecture but were custom designs.

For Qualcomm, using more custom core designs — a move Apple has also taken — could lower some of Arm’s licensing costs in the short term and ease the transition to a competitive architecture in the long term.

A source close to Arm said its licenses with Qualcomm are not in dispute and that only technology developed under Nuvia’s licenses is being challenged in the lawsuit.

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(Reporting by Jane Lanhei Lee and Stephen Ellis) Editing by Nick Ziminsky and David Gregorio

Our Standards: Thomson Reuters Trust Principles.

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