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8 September 2022

ARM’s risky Qualcomm lawsuit is potential RISC-V boost

Businesses founded on intellectual property (IP) licensing need their lawyers to be as smart as their engineers as they seek to defend and enforce their rights. However, mobile processor IP giant ARM’s decision to sue one of its largest customers, Qualcomm, is a particularly high-stakes move, especially as Qualcomm itself has a huge licensing business whose legal department is rightly feared.

ARM, which is still owned by Japan’s Softbank following a failed attempt to sell it to Nvidia, filed a lawsuit last week against Qualcomm and Nuvia, the advanced CPU developer that Qualcomm acquired at the start of 2021. ARM claims that the companies have broken the terms of their licensing deals and used ARM trademarks in relation to unlicensed products.

Nuvia emerged from stealth in 2019 to address the server processor sector, having been formed by several semiconductor industry veterans, including the former chief architect of Apple’s iPhone chips. It obtained an architectural license from ARM, which enables it to create customized chips based on ARM-compatible cores (Qualcomm also has such a license). Nuvia also licensed off-the-shelf ARM designs. Then it was acquired by the San Diego company for $1.4 billion to boost its own faltering progress towards the server and cloud infrastructure markets.

At issue is the transfer of the Nuvia licenses to its new parent. ARM claims these could not be transferred, or used in any way by Qualcomm, without ARM’s permission, which was apparently not obtained, even though Qualcomm appeared to be looking to incorporate Nuvia’s custom CPUs into its own chips. That led to ARM terminating its licenses with Nuvia earlier this year. Now it is calling on Qualcomm to destroy and stop using the allegedly offending designs, as well as stop using ARM trademarks for certain products, together with financial compensation.

Although Qualcomm has its own architectural license, ARM claims that the US firm has actually relied on off-the-shelf cores since it discontinued its Centriq server processor line in 2018. Its lawsuit says: “Discovery is likely to show that, as of early 2021, Qualcomm had no custom processors in its development pipeline for the foreseeable future”.

This means that, in ARM’s view, Qualcomm has been using the Nuvia architectural license for technologies for which it was not authorized (these licenses are not generic to all ARM technologies but relate to specific designs). It is highly unusual for a start-up like Nuvia to afford the cost of an architectural license, let alone of developing custom cores, so chip analysts believe ARM may have provided discounts in order to promote its own goal of building a server processor ecosystem – but would not want Qualcomm to benefit from those of course.

“As an intellectual property company, it is incumbent upon us to protect our rights and the rights of our ecosystem. We will work vigorously to protect what is rightfully ours and we are confident that the courts will agree with us,” ARM said in a statement.

Ann Chaplin, Qualcomm’s general counsel, said in prepared remarks, “ARM’s lawsuit marks an unfortunate departure from its longstanding, successful relationship with Qualcomm. ARM has no right, contractual or otherwise, to attempt to interfere with Qualcomm’s or Nuvia’s innovations. ARM’s complaint ignores the fact that Qualcomm has broad, well-established license rights covering its custom-designed CPUs, and we are confident those rights will be affirmed.”

Whatever the legal rights and wrongs, ARM is taking a risk at a time when its own future is uncertain. Softbank, after the failure of the sale to Nvidia, pledged to mount an IPO, returning ARM to the public domain on a US exchange (possibly also with a London listing, given its UK base). But supply chain disruption and looming global economic crisis make any such plans uncertain, and the conditions do not look ideal to have a very public falling-out with a very big customer, which is also the market leader in ARM’s core segment, smartphone chips.

Another risk is that ARM will provide ammunition for alternative processor platforms such as the open source RISC-V, which has been gaining ground as a rival to ARM or Intel x86. Indeed, Qualcomm itself invested in RISC-V specialist SiFive in 2019 and joined the RISC-V Alliance.

This must not be overstated. RISC-V remains unproven in many markets and lacks the huge skills base associated with ARM. However, ARM would do well to calm tensions with Qualcomm, which was one of the leading opponents to the Nvidia deal, which it claimed would end ARM’s independence by putting it in the hands of a single licensee. Qualcomm instead proposed that a group of large ARM customers should take stakes in the company to ensure its future as well as its objectivity.

Technology-focused investment adviser Richard Windsor of RadioFreeMobile speculated on a possible hand of Apple behind the scenes, pointing out that the iPhone maker had already tried to destabilize Nuvia. Apple has a love-hate relationship with Qualcomm, having tried to dump its iPhone modems in favor of new designs from Intel, a project that failed. Apple is currently designing its own modem, but may struggle to match Qualcomm’s performance in time for the next iPhone releases.

“The attempted acquisition of ARM by Nvidia lit a fire underneath the tail of a moribund RISC-V which is now attracting investment and gobbling up share at the low end of the market,” Windsor wrote in his latest note. “RISC-V remains a very small competitor to ARM that has yet to have any significant impact on its revenues, but the threat is growing, and annoying Qualcomm in this way is likely to push it to allocate more resources to RISC-V.”