Shares of Qualcomm Inc. (QCOM) tumbled in pre-market trading on Tuesday, plunging as much as 5.30% after reports surfaced that Arm Holdings Plc has canceled a crucial licensing agreement that allows Qualcomm to use Arm's intellectual property to design its own chips.
The move by Arm, which is majority-owned by Japan's SoftBank Group Corp., escalates an ongoing legal dispute between the two technology giants. In 2022, Arm sued Qualcomm for breach of contract and trademark infringement, alleging that Qualcomm failed to renegotiate the terms of its licensing agreement after acquiring chip design startup Nuvia in 2021.
According to reports, Arm has now given Qualcomm a 60-day notice to remedy the dispute, threatening to terminate the so-called "architectural license agreement" that allows Qualcomm to create its own chips based on Arm's proprietary instruction set architecture. If the cancellation takes effect, it could potentially cripple Qualcomm's ability to sell products that account for much of its $39 billion in annual revenue, or expose the company to massive damages claims.
