Qualcomm and Arm: Pre-Trial Settlement Dynamics Explained

Arm's actions suggest a strategic push for a settlement with Qualcomm before the trial.

### Qualcomm and Arm: Tensions Rise Ahead of Trial and Settlement Negotiations
* ⚖ Arm's recent actions suggest a strategy to **prompt a pre-trial settlement** with Qualcomm, coinciding with a **60-day timeline** that ends on **December 21st**, right before the scheduled trial from **December 16th to 20th**.
* 📈 Qualcomm's unveiling of the **Snapdragon 8 Elite**, based on the **Nuvia acquisition**, adds complexity to the ongoing dispute, especially following Arm's decision to **cancel the license**.
* 🕵 The situation raises questions about the timing of Arm's actions, particularly after Qualcomm's recent product announcements, indicating that **negotiations are intensifying**.
* 💼 Qualcomm acquired Nuvia, which originated from the **Apple M1 design team**, to leverage their expertise for future products, transitioning from a **technology license to an architectural license** that could affect **royalty rates**.
* 📉 Arm's reluctance to approve the license transfer suggests concerns that Qualcomm might **lower royalty rates** if they switch to an architectural license, which could **impact Arm's revenue**.
* 🤝 Qualcomm argues that it already holds an **architectural license covering similar technology**, indicating a **strong stance against Arm's demands**.
* 📱 Qualcomm remains a dominant player in the flagship smartphone market, leveraging **Nuvia's architectural expertise** to enhance performance across its diversified portfolio, which includes **PCs, automotive, and IoT sectors**.
* 🔍 As the trial approaches, both companies face pressure to reach a settlement, as jury trials can be **unpredictable and potentially detrimental to their business relationships**.

This was an action taken by Arm, to your mind, to force some kind of pre-trial settlement. Please take that from Stacy. Yeah, it feels that way. So it's a 60-day supposedly timeline. Assuming they pulled the date. They did this yesterday. The 60-day limit would be December 21st. The trial right now is scheduled for December 16th through December 20th. So it's kind of right on top of that. Yeah. To me, this feels like an attempt to drive a settlement from Qualcomm. On the eve of the trial. It feels like the ramp is ramping up. The negotiations are pretty hard there. So, yes, Stacy, on Monday night, Qualcomm unveiled Snapdragon eight elite, which is based on the Nuvia acquisition. Right. Based on Nuvia designs. Less than 24 hours ago, Cristiano Amon came on the show with me to discuss it. Last night Bloomberg broke this story about Arm canceling the license as part

of this dispute. Coincidence or what do you make of the chronology? Absolutely not. And they look like good cards, right? I mean, look, the general thrust of this dispute, as I understand it, and I will caveat, I'm not a lawyer and like I won't be on the jury either. But Qualcomm bought this company, Nuvia. Nuvia was an arm server startup. But what it really was, it was a bunch of Apple guys. It was the Apple M1 design team that designed Apple's first custom chip. Qualcomm bought them to get that expertise, and they are going to be delivering products across their portfolio using that expertise. Qualcomm's current products are made on something called a technology license from that's like the off-the-shelf arm stuff. Moving to an architectural license where Qualcomm does the custom chips, the royalty rates tend to be lower; nearly as rates were actually higher. So what ARM I think really wants is for

Qualcomm to apply Nuvia at higher rates like through the portfolio, because otherwise the rates would come down. And when Qualcomm and to enable that ARM decided not to approve the license transfer of Nuvia to Qualcomm. Qualcomm's response and I'll be honest, I have a certain degree of sympathy for it, although I guess a non-lawyer, their response is effectively like, What are you talking about? We have our own architectural license that covers the exact same IP and technology. Take a hike. Right. And that seems to be where where this is I think ARM is potentially worried that rates could go lower if Qualcomm makes the transition from technology license to architectural license. You know I think if yes Qualcomm pretty agree to what ARM is wanting then the rates would go higher and hopefully they'll settle out somewhere in the middle like I don't know. I can't imagine that it's good for either of them to actually take this in

front of a jury. Jury trials are a bit of a crapshoot under the best of circumstances. So, Stacey, since you guys allow me to take this opportunity just to point out that aam did not comment on the Bloomberg report that Malcolm did. Qualcomm did, so let's just show what Qualcomm had to say, or at least some of it. And you know, it's kind of fighting talk, right? It's them saying that, you know, it's trying to strong-arm a long-time partner. And this is the bit I want to talk to you about: interfere with our performance leading CPUs, and then we can get to the royalty rates bit. Qualcomm is not the same company today that it was when I moved to California six years ago. It's tried to diversify its business and the Nuvia acquisition, and its sort of change of the technology offers the smartphones core to that. Could you just speak about how you view Qualcomm and its place in this?

smartphone market for Android? Yeah. Yeah. So they're pretty dominant. They own the whole flagship space, particularly the flagships in smartphones where the ASPs are higher. They've also been, you know, the whole space has been making this push toward smartphones, and we can argue, do people want smartphones? Does it drive an upgrade cycle? But increasingly, when people go out to buy smartphones, they're going to buy a smartphone because that's what's going to be for sale. And the content, I think, is materially higher in some of those phones versus phones without the added functionality. And so, and that's a big area where some of the Nuvia architectural expertise is coming in in terms of performance and everything else. We saw some of the benchmarks from some of the new stuff that they announced earlier this week, and why you like the parts look really good, right?

That's kind of what's and but they're not just isolating Nuvia though to smartphones. Clearly, they've already launched PC chips and they're going to be rolling out across the rest of their increasingly diversified portfolio, auto, and IoT. And like everything else. Yeah.

Arm Escalates Chip Feud with Qualcomm

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Bloomberg Technology

Arm's Strategic Move Before Qualcomm's Trial

Arm's recent action to cancel Qualcomm's license appears to be a strategic move to drive a pre-trial settlement, with the timeline coinciding closely with the trial dates.

Qualcomm's unveiling of the Snapdragon eight elite, based on the Nuvia acquisition, adds to the tension between the two companies.

The dispute centers around Qualcomm's shift from a technology license to an architectural license for custom chips, which Arm is aiming to leverage for better royalty rates.

Qualcomm's Response to ARM's License Transfer Denial

Qualcomm plans to apply Nuvia's technology at higher rates to prevent a decrease in rates.

ARM's decision to deny the license transfer has led to Qualcomm's strong response, citing their own architectural license as covering the same IP and technology.

The situation has created tension between the two companies, with Qualcomm's diversification and Nuvia acquisition playing a key role in its evolving business strategy.

Dominance of Android in the Smartphone Market

Android dominates the flagship smartphone space, particularly where average selling prices are higher.

The push towards smartphones is increasing, with many consumers buying them for their added functionality.

Nuvia's architectural expertise is contributing to improved performance in these phones, as seen in the recent benchmarks announced.

Nuvia is expanding beyond smartphones, already launching PC chips and planning to diversify into auto and IoT.

The company's portfolio is increasingly varied, aiming to roll out chips across different sectors.

This strategic expansion reflects a broader approach to chip production.