Qualcomm Inc. (NASDAQ: QCOM) has initiated a worldwide antitrust campaign against Arm Holdings Plc (NASDAQ: ARM), marking a shift in their business relationship.
The two companies, previously partners in the semiconductor industry, now find themselves in direct competition within the computing chip market. Qualcomm has filed complaints with competition authorities across multiple jurisdictions, alleging that Arm is engaging in anti-competitive conduct by restricting access to its technology.
Regulatory Complaints and Allegations
According to Bloomberg News, Qualcomm has lodged complaints with the European Commission, the U.S. Federal Trade Commission (FTC), and the Korea Fair Trade Commission. The company contends that Arm’s actions violate competition laws by undermining fair access to its technology, following two decades of operating an open network model. Qualcomm argues that Arm’s recent practices limit innovation and unfairly disadvantage competitors in the rapidly evolving semiconductor industry.
Legal Battle and Court Ruling
Parallel to the antitrust campaign, Qualcomm and Arm have been embroiled in a legal dispute over intellectual property rights and licensing agreements. In a U.S. federal court trial, December 2024, a jury determined that Qualcomm’s central processors are properly licensed under an agreement with Arm, Reuters reported. The trial, which lasted a week, ended in a partial victory for Qualcomm, as the jury failed to reach a unanimous decision on all issues, leading to a mistrial on one of three key questions.
The court ruling affirmed Qualcomm’s right to continue innovating with its existing chip designs, reinforcing its expansion into the laptop processor market. However, Arm has vowed to seek a retrial, maintaining that its intellectual property rights were infringed upon. Following the announcement of the verdict, Arm’s stock dropped 1.8% in extended trading, while Qualcomm’s shares saw a 1.8% increase.
Implications for the Semiconductor Industry
The outcome of this legal battle carries broad implications for the semiconductor sector. Qualcomm’s strategy centers on expanding its presence in the PC market with its “AI PC” chips, designed for tasks such as artificial intelligence-driven chatbots and image generation. Other major players, including Nvidia, Advanced Micro Devices (AMD), and MediaTek, are also planning to introduce Arm-based processors into the PC market.
Industry analysts suggest that the dispute revolves around Qualcomm’s royalty obligations to Arm. Before Qualcomm acquired Nuvia, a startup specializing in high-performance computing cores, Nuvia was subject to higher royalty rates. Qualcomm argues that it is entitled to lower rates under its existing license, a claim that Arm disputes. During the trial, Arm asserted that its licensing agreements granted it the right to demand the destruction of Nuvia’s custom core designs, a position with potential ramifications across the semiconductor industry.
Future Outlook
Despite the ongoing litigation, experts believe the ruling strengthens Qualcomm’s position, allowing it to continue developing and selling its custom-designed chips. Analysts such as Stacy Rasgon of Bernstein suggest that the risk of Qualcomm losing access to Nuvia’s technology is now significantly reduced. However, the unresolved questions surrounding Arm’s licensing framework could shape future business practices for technology firms relying on Arm’s architecture.
Ben Bajarin, CEO of Creative Strategies, notes that Arm’s financial projections have not accounted for increased royalty payments from Qualcomm. As such, the dispute remains primarily a contractual argument rather than a fundamental shift in Arm’s economic strategy. Nonetheless, industry observers like Jim McGregor of Tirias Research caution that the case could set precedents affecting a wide range of industries that rely on Arm-based technologies, from consumer electronics to aerospace.
