Arm Holdings moves to cancel Qualcomm's chip design licenses: BBG

Arm Holdings (ARM) has reportedly issued Qualcomm (QCOM) a 60-day notice of termination for its intellectual property licenses used in chip design, according to a report by Bloomberg. This escalation comes amid an ongoing legal dispute between the two semiconductor giants, which began when Arm Holdings sued Qualcomm in 2022 over alleged breach of contract.

Catalysts Co-Hosts Seana Smith and Madison Mills details the blowback of this decision for Qualcomm's business operations.

To watch more expert insights and analysis on the latest market action, check out more Catalysts here.

This post was written by Angel Smith

Video Transcript

First up arm, reportedly cancelling a licence agreement with partner Qualcomm that allowed it to use arms intellectual property to design chips.

This comes in an ongoing illegal battle, according to Bloomberg Arm has given Qualcomm.

A 60 day notice of the cancellation arm sued Qualcomm for breach of contract and trademark infringement back in 2022 that is set to go to trial in December.

So, ultimately, what this would mean for Qualcomm if the cancellation does take effect, the company might have to stop selling products that account for as much as of its roughly $39 billion in revenue or face claims of massive damages.

This is, according to the report here from Bloomberg, so obviously real implications and immediate implications potentially to their business.

You're looking at both shares actually under a bit of pressure here this morning, but again we take a look at that longer term effect.

Clearly, it could be Qualcomm here that could be feeling or taking a bigger hit at this in fact is true, and we do see sort of a decoupling here of arm and Qualcomm.

Yes, it's interesting seeing some of the analysts reaction because as you can see from the share prices.

This is kind of symbiotic relationship.

They're both relying on each other for the use of this IP.

They gave them the 60 day warning here, but an analyst over at Bloomberg Intelligence saying that this is arms attempt to get a little bit of leverage here, saying quote a settlement remains the most probable outcome, with timing likely around that trial here.

We also have JP.

Morgan, who has an overweight on both companies here, saying that with the licence cancellation marks, an escalation of the disagreement between the two firms and eventual settlement is still likely here.

So long term could potentially lead to a lot much ado about nothing here.

But short term, you're, of course, seeing that pressure on both of these names here.