Arm vs. Qualcomm Dispute Jeopardizes AI-Powered PCs


A two-year legal battle between tech giants Arm Holdings(NASDAQ:ARM) and Qualcomm (NASDAQ:QCOM) risks disrupting the rollout of new AI-powered personal computers, according to industry executives and experts.

At the annual Computex trade show in Taipei, executives from Microsoft (NASDAQ:MSFT), Asus, Acer, and others joined Qualcomm CEO Cristiano Amon to promote a new generation of AI-powered PCs. However, conversations at the event frequently shifted to the contract dispute between Arm Holdings and Qualcomm, which threatens to delay the shipment of these innovative PCs.

The dispute stems from Arm’s lawsuit against Qualcomm in 2022 for not negotiating a new license after acquiring Nuvia, a company founded by former Apple (NASDAQ:AAPL) engineers. Arm claims that the new laptop processors, intended for Microsoft’s latest AI PC, Copilot+, are direct descendants of Nuvia’s technology and should therefore incur additional royalties.

“Arm’s claim against Qualcomm and Nuvia is about protecting the Arm ecosystem and ensuring Qualcomm adheres to its contractual obligations,” an Arm spokesperson stated.

Qualcomm, however, maintains that its existing broad license for Arm technology covers its PC chips. “Arm’s complaint ignores Qualcomm’s established license rights for its custom-designed CPUs,” said Ann Chaplin, Qualcomm’s general counsel.

The stakes are high, as Microsoft anticipates capturing about 5% of the market with Arm-based laptops by the end of the year, equating to roughly 1 to 2 million units. Nearly two dozen models from Microsoft, Dell (NYSE:DELL), and Samsung (KRX:005930) are expected to hit the market on June 18.

If Arm wins the litigation, Qualcomm and its approximately 20 partners, including Microsoft, might have to halt shipments of the new laptops. Doug O’Laughlin, founder of chip financial analysis firm Fabricated Knowledge, commented, “The more successful the laptops are, the more fees Arm can eventually demand.”

Adding another layer of complexity, Qualcomm’s exclusive deal to supply laptop builders with its chips expires this year, potentially opening the market to competitors like Nvidia (NASDAQ:NVDA) and Advanced Micro Devices (NASDAQ:AMD).

Despite the public legal battle, some investors and analysts believe a settlement will be reached before the trial, scheduled to begin in federal court in Delaware in December. “There is a degree of absurdity in Arm suing its second-biggest customer and Qualcomm being sued by its largest supplier,” said Jay Goldberg, CEO of D2D Advisory.

The outcome of this legal dispute could significantly impact the AI-powered PC market, a sector poised for substantial growth.

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