Qualcomm Inc. (QCOM) shares plummeted by 5.79% on Monday, following reports that Arm Holdings Plc, the British semiconductor design firm, has escalated its legal battle with the San Diego-based chipmaker by canceling a crucial licensing agreement that enables Qualcomm to design its own chips using Arm's intellectual property.
The canceled agreement, known as the "architectural license agreement," stems from an ongoing dispute between the two tech 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 license that allows the company 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.
