Arm Changes Business Model – OEM Partners Must Directly License From Arm

No More External GPU, NPU, or ISP’s Allowed In Arm-Based SOCs

The Qualcomm-Arm saga is epic and there is a new massive update in the case. This update contains evidence that Arm is changing its entire business model and moving to require licenses from OEMs. It also contains evidence of some hints at anti-competitive licensing behavior around GPUs, NPUs, and ISPs.

As a refresher, Arm sued Qualcomm. Qualcomm then filed a counterclaim, we covered that ~3 weeks ago.

Is Arm Desperate? Qualcomm Claps Back At Arm’s Potentially Frivolous Lawsuit

According to the updated Qualcomm counterclaim, after 2024, Arm is no longer going to license their CPUs to semiconductor companies such as Qualcomm under technology license agreements (TLAs). Instead, Arm will only license to the device-makers. Arm is allegedly telling OEMs that the only way to get Arm-based chips will be to accept Arm’s new licensing terms. Qualcomm claims that Arm is lying to Qualcomm’s OEM partners about Qualcomm’s licensing terms.

Furthermore, Qualcomm claims that Arm is telling the OEMs that semiconductor manufacturers will not be able to provide other elements of their Arm-based SOCs that Arm also offers as a licensed product. This includes GPUs, NPUs, and ISP. It seems that Arm is effectively bundling its other IP with the CPU IP in a take-it-or-leave-it model. That would mean Samsung’s licensing deal with AMD for GPU or Mediatek with Imagination GPU is no longer allowed after 2024. Furthermore none of these firms could use their in-house ISP or NPU despite it being far superior to Arm's.

If true, it seems Arm is playing very dirty with their threats to Qualcomm and OEMs. Mediatek, Samsung, and other Arm partners should be very scared. This is going to accelerate RISC-V roadmaps rapidly. It also reeks of anti-competitive behavior. Nvidia has a 20-year Arm license secured, so they will be fine. Apple obviously has great licensing terms due to their history with founding Arm. We hear Broadcom also has very favorable terms as well.

If you don’t believe us and think this all seems crazy, we get it. This is what we understand after reading the legal document. Just read this excerpt from Qualcomm’s counterclaim that was filed to the courts yesterday. We have attached the document at the end of the article.

Since filing the Complaint in this case on August 31, 2022, ARM has persistently and wrongfully attempted to disrupt Qualcomm’s business and customer relationships by spreading misinformation about the nature of Qualcomm’s ARM licenses to customers that purchase Qualcomm’s ARM-compatible cores and chipsets.

ARM has engaged in this misinformation campaign directly through its leadership and through the leadership of its owner, SoftBank, acting on ARM’s behalf, in an attempt to damage Qualcomm, disparage its products, disrupt Qualcomm’s relationships with its customers, and create uncertainty where there is none.

At least as early as October 2022, ARM falsely stated to one or more of Qualcomm’s longstanding original equipment manufacturer (“OEM”) customers that unless they accept a new direct license from ARM on which they pay royalties based on the sales of the OEM’s products, they will be unable to obtain ARM-compliant chips from 2025 forward. ARM has also threatened at least one OEM that, if the OEM does not do so, ARM will go on to license the OEM’s large competitors instead—the implication being that the OEM would be excluded from the market and could not obtain any ARM-compliant chips from Qualcomm or any other supplier, including “off-the-shelf” chips from ARM under a TLA. ARM has done this despite already having approached the OEM’s competitors with a direct licensing offer, while acting as if ARM would only approach the competing OEMs if the threatened OEM declined the license in the first instance.

ARM also told one or more Qualcomm customers that, when the existing TLA agreements expire, ARM will cease licensing CPUs to all semiconductor companies—including Qualcomm—under an ARM TLA. ARM claimed that it is changing its business model and will only provide licenses to the device-makers themselves. ARM has explained to the OEMs that a direct OEM license will be the only way for device-makers to get access to ARM-compliant chips.

ARM is trying to coerce such customers into accepting its direct license by falsely asserting that Qualcomm will not be able to provide them with ARM-compliant chips beginning in 2025 because Qualcomm’s ARM license agreements terminate in 2024, that ARM will not extend its licenses with Qualcomm, and that ARM will not allow Qualcomm to ship products from 2025 forward.

These statements are unequivocally false and are intended to harm Qualcomm’s relationships with its customers—and to secure lucrative contracts with those customers for ARM—by calling into question Qualcomm’s ability to maintain its ARM licenses beyond 2024 and provide products to its customers, despite Qualcomm having a clear right to do so for years to come under its ARM licenses.

Qualcomm is licensed for several years past 2025 under its ALA, which provides Qualcomm with the unilateral right to extend the contract past the initial term for several more years. Specifically, the ALA states:

Unfortunately, that section is redacted.

Accordingly, because the Qualcomm ALA has not been terminated—and because no event has occurred that would give rise to a right to terminate—the initial term of the license will continue until [REDACTED]. Qualcomm then has the right to extend the license until [REDACTED]. Accordingly, ARM does not have the right to refuse to extend Qualcomm’s license or stop Qualcomm from shipping its products in 2025.

Moreover, ARM has no right to require additional royalties from Qualcomm’s customers. Qualcomm’s ALA provides Qualcomm with an exhaustive license, meaning that ARM is not entitled to go and seek another royalty from Qualcomm’s customers on the same products for which ARM has received a royalty from Qualcomm.

ARM’s coercion efforts did not stop with these false statements about Qualcomm’s license agreements. To apply more pressure, ARM further stated that Qualcomm and other semiconductor manufacturers will also not be able to provide OEM customers with other components of SoCs (such as graphics processing units (“GPU”), neural processing units (“NPU”), and image signal processor (“ISP”)), because ARM plans to tie licensing of those components to the device-maker CPU license.

ARM also claimed that it had already informed Qualcomm about its new business model that requires a direct license with the OEMs. That statement is false. ARM has not notified Qualcomm that it will be requiring direct licenses from device-makers. ARM did not tell Qualcomm that it intends to stop licensing CPU technology as a standalone license, that it will no longer license CPU technology to semiconductor companies, or that it will require licensees to obtain other technologies (notably ARM’s GPU and NPU technology) only from ARM. As noted above, these attempted or threatened changes in ARM’s business model do not account for Qualcomm’s existing agreements with ARM.

While ARM’s statements about Qualcomm have no basis in fact, they cause significant reputational damage and harm Qualcomm’s customer relationships. Moreover, while ARM’s goal may be to harm Qualcomm—and to coerce contracts with Qualcomm’s customer that are unnecessary in view of the fully exhaustive rights it has granted Qualcomm under its contracts—its tactics will result in harm to ARM’s customers and licensees throughout the industry.

This shows this lawsuit isn’t settling any time soon. The only way this ends in the short term is through a court order.

We thought this lawsuit was ultimately over money, but now we are starting to think this lawsuit is much more personal.

Is Softbank/Arm angry that Qualcomm got the regulators to block the Nvidia acquisition?

Arm is going to try get their pound of flesh, even if that means their previously good name is dragged through the mud. We think Arm is making a massive mistake that will accelerate competing architectures.

Qualcomm’s use of any ARM Technology utilized in NUVIA’s technology was fully licensed under Qualcomm’s license agreements as soon as Qualcomm acquired NUVIA.

There are no provisions in either the NUVIA-ARM agreements or the Qualcomm-ARM agreements that:

a.      prohibited Qualcomm from purchasing NUVIA or acquiring NUVIA’s technology;

b.      required Qualcomm to obtain ARM’s consent to purchase NUVIA or access NUVIA’s technology;

c.      mandate that Qualcomm stop using any NUVIA technology it acquired;

d.      mandate that Qualcomm destroy NUVIA’s technology;

e.      prohibit the transfer or disclosure of NUVIA’s technology or confidential information to Qualcomm;

f.       limit the use of NUVIA technology only to NUVIA; or

g.      require Qualcomm to obtain ARM’s consent to further develop any in-process

h.      designs or technology that Qualcomm acquired from NUVIA.

Arm Qc Answer And Defenses And Amended Cc Redacted Version

366KB ∙ PDF file

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Shout out to Ravi for pointing out this update in the legal battle to us.