A two-year legal battle between two tech titans threatens to disrupt the emerging wave of new personal computers powered by artificial intelligence, according to tech industry executives and experts.
Last week at the annual Computex trade show in Taipei, Qualcomm CEO Cristiano Amon was joined by an audience of executives from Microsoft, Asus, Acer and other companies to introduce a new generation of personal computers with artificial intelligence.
But discussions in the hallways, over dinner and over drinks focused on how a contract dispute between Arm Holdings and Qualcomm, which work together to make the chips powering these new laptops, could abruptly interrupt delivery of new PCs that are expected to bring billions of dollars to Microsoft and its partners.
According to rough projections, Microsoft expects to take about 5% of the market with laptops based on Arm technology by the end of the year, selling between 1 and 2 million units.
Nearly two dozen models from Microsoft, Dell and Samsung are expected to ship to consumers on June 18.
A victory for Arm in this dispute could force Qualcomm and its approximately 20 partners, including Microsoft, to interrupt deliveries of the new laptops.
“This is a real risk,” said Doug O’Laughlin, founder of the financial analysis firm Fabricated Knowledge, which specializes in microchips. “The more successful laptops become, the more royalties Arm will be able to collect.
The British company, majority owned by the Japanese group SoftBank, sued Qualcomm in 2022 for failing to negotiate a new license after acquiring a new company. The lawsuit focuses on technology that mobile chip designer Qualcomm acquired from a company called Nuvia, founded by Apple chip engineers, and which it purchased in 2021 for $1.4 billion.
Arm creates the intellectual property and designs that it sells to companies such as Apple and Qualcomm, which use them to make chips. Nuvia had planned to design server chips based on Arm licenses, but after the acquisition closed, Qualcomm reallocated its remaining team to developing a laptop processor, which is currently used in the latest smart PC. artificial from Microsoft, called Copilot+.
Arm said the current design planned for Microsoft’s Copilot+ laptops is a direct technical descendant of Nuvia’s chip and that since the product is now aimed at laptops, it should carry a separate royalty rate.
“Arm’s complaint against Qualcomm and Nuvia seeks to protect Arm’s ecosystem and partners who rely on our intellectual property and innovative designs, and therefore to enforce Qualcomm’s contractual obligation to destroy and stop using Nuvia designs derived from Arm technology,” an Arm spokesperson said.
Qualcomm said its expanded license for Arm technology already covered its PC chips, and a Qualcomm spokesperson said its position had not changed since Arm filed suit in 2022. The spokesperson Parole referred Reuters to a 2022 statement:
“Arm’s complaint ignores the fact that Qualcomm has extensive and well-established licensing rights covering its custom processors, and we are confident that these rights will be upheld,” Qualcomm general counsel Ann Chaplin said in a statement. a statement.
FRENEMIES
Adding to this legal conflict is another layer of complexity, as the exclusive agreement to supply chips to laptop makers expires this year, opening the market to Qualcomm’s competitors.
Nvidia and Advanced Micro Devices are working on chips, Reuters reported last year. Other design companies will join the fray and make chips for Microsoft’s new effort, industry executives said.
However, given that the first batch of Windows designs for Microsoft’s new Copilot+ laptop program are based on Qualcomm processors, the dispute is an undercurrent that exists but is often not mentioned in public .
Despite the public fight between two companies that depend on each other for revenue and profits, some investors and analysts believe they will reach an agreement well before the trial, which is expected to begin in federal court in Delaware in December.
“It’s pretty absurd that Arm is going after its second-largest customer and Qualcomm is being sued by its biggest supplier,” said Jay Goldberg, CEO of D2D Advisory, a strategy and financial consulting firm. (Reporting by Max A. Cherney in San Francisco; writing by Kenneth Li and Paul Simao)
