Arm Was All Bark, No Bite in Battle with Qualcomm (Premium)

10 days ago, Arm v. Qualcomm ended in a resounding victory for Qualcomm, with a jury determining that the chip making giant did not violate the terms of its licensing agreement with Arm Holdings. On the opening day of the trial, I described the events that led up to this pointless legal drama. Here, I will try to clear up some misconceptions about this dispute.

There were plenty of opinions based on very little information heading into the trial, and there still are now. What we couldn't know from the outside was the language of the licensing agreements that Arm Holdings reached, separately, with Nuvia and Qualcomm, agreements that still bind Arm and Qualcomm together. I was hoping for clarity on this during the trial. And while the full details of their arrangement were kept mostly private, one clause revealed in court says it all. Qualcomm's agreement with Arm clearly states that the license covers "work done by itself and others."

Also notable, while both companies were publicly trying to sound as confident as possible heading into the trial, only Arm based its future financial guidance on the assumption that it would lose in court and never see a revenue windfall. Qualcomm never changed its forecast. And that, to me, was an important point. Arm is only recently a publicly held company, it has yet to crack the $1 billion quarterly revenue ceiling, and investors are already getting edgy because it's a non-player in AI. Qualcomm, meanwhile, is an economic superpower, with over 10 times the revenues of Arm, an impressive and growing array of chips that target ever conceivable market, and strong AI credentials.

And then there's the Softbank issue.

Softbank is Arm's parent company, and it has been pressuring the firm to raise revenues by increasing its licensing fees. When Arm resisted, there was a leadership change. And the current leadership has been uniquely aggressive in trying to capitalize on Qualcomm's Nuvia acquisition.
The more you know
But the more I learn about the dispute behind Arm v. Qualcomm, the more I believe that it may be time for another change in leadership at Arm. This feud was worse than pointless, and it was a big blow to Arm's credibility at a time when it is trying to expand its offerings to partners. What Qualcomm demonstrated in court was that it doesn't really need Arm or any new chip designs from the company, and that the Arm designs that remain at the heart of its chips are almost vestigial in nature: Qualcomm is now actively moving past Arm's processor core designs.

This could be Arm's Achilles Heel. It does design the basis of the chips that power the world's computing devices across the stack, but its most influential and popular licensees--like Apple and Qualcomm--long ago veered off from Arm's work and created chips that are their own. That Apple and Qualcomm are also partners and competitors is interesting on some level. But the two are more similar than the former will ever admit.

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