Ah, the nuclear option. So why is ARM cancelling Qualcomm’s right to make ARM-compatible chips?

To understand what’s going on, you need to know a little bit about how ARM makes money. ARM doesn’t make processors. Instead, ARM develops processor core designs, which you can license to build your own chips, with ARM earning a per-unit fee. That’s known as a Technology License Agreement, or TLA, and it’s used by a lot of companies wanting to build, say, an industrial controller which includes an ARM core. 

The other option – and one that’s only used by a limited bunch of companies – is an Architecture Licensing Agreement, or ALA. In this case, you have the right to build your own ARM-compatible core, using it yourself or selling it to third parties. Apple, for example, has an ALA, and its “Apple Silicon” designs are not based on ARM cores at all. The rumour is that Apple pays relatively small amounts of this (some reports say it accounts for as little as 5% of ARM revenue), despite Apple Silicon being the driving force behind the world’s most successful smartphone – and now, iPad and Mac too.

NUVIA and Qualcomm

NUVIA was a startup founded by former Apple and Google chip designers with the intention of creating a new generation of server processors, ones which would dramatically improve both power efficiency and speed over what was already out there. As such, it acquired an architecture license, allowing it to build its own cores. And we know, it created some pretty-fast cores, with fees and royalty rates to ARM which reflected its focus on the server market. 

Qualcomm also had both an ALA and a TLA, but its attempts to design its own fast ARM cores had repeatedly failed. The last custom core it shipped was the Kryo, in 2015 (2018’s Kryo200 series was based on an ARM core design). Instead it was forced to rely on ARM core designs, which is why its chips were good enough for smartphones, but didn’t get to the performance levels required for servers or computers. 

This is why Qualcomm bought Nuvia: without it, the company was effectively locked out of the server and computer markets, and with pressure on it from the likes of Microsoft to create a chip capable of competing on power and performance-per-watt with Apple, it needed something.

There was only one problem: according to ARM, Nuvia could not transfer technology created under its ALA to another company without ARM’s consent. That means that – even though it has its own ALA – Qualcomm couldn’t use the processor cores which Nuvia had developed. It needed ARM’s permission first, and ARM wasn’t going to give that permission unless Qualcomm paid it more money. Qualcomm didn’t, leading to ARM terminating Nuvia’s ALA in March 2022. At that point, ARM also reminded both Nuvia and ARM that they would need to stop using and destroy the technology Nuvia had developed under that ALA. 

Qualcomm, obviously, did no such thing. It needs those cores. Without them, it’s back to either the hopeless task of developing its own cores, or licensing ARM designs which it can’t make competitive with Apple or Intel.

What’s crazy about this is that in April 2022, Qualcomm’s general counsel sent a letter to ARM acknowledging the termination, recognising its obligations, and stating that Nuvia and Qualcomm were in compliance. In May, it then asked ARM to certify that a new processor was in compliance with ARM architecture. ARM claims this processor was, in fact, based on Nuvia designs – and so violates those licenses.  That processor is, of course, today’s Snapdragon Elite.

Who is going to win?

Mostly, lawyers. Big, expensive IP lawyers.

The most likely outcome is that ARM and Qualcomm come to an agreement allowing it to keep processors based on Nuvia designs on the market, and ARM gets more money. 

But there is a curve ball here: in making the Snapdragon Elite, Qualcomm has made an ARM core which is miles ahead of anything ARM designs. And, under its ALA, it could license that core to other chip makers – something that competes directly with ARM. 

That’s very different to the situation with Apple, which won’t ever license its Apple Silicon cores to anyone else. ARM wants ARM-based processors to take over the world, but it would much rather all the design licensing money comes into ARM than into Qualcomm, which would than only have to pay it a smaller slice of the licensing pie.

My bet is on some kind of large exchange of cash. But this might not be as predictable as that. 

Notably, there’s no indication ARM has cancelled any of Qualcomm’s technology licensing agreements (TLAs). It remains free to make chips based on ARM-designed cores, covered by its TLAs – which are most of its processors (including all the Snapdragon 8 series, apart from 8 Elite). Despite reports you might read, this isn’t going to “upend the smartphone market”. Nor has it “cancelled Qualcomm’s license to use its chip design standards”, which is a fancy way of saying “I don’t know the difference between an ALA and TLA”. 

Instead, think of this as removing one of the planks which might have formed a defence for Qualcomm’s legal team. It could have argued that, as it also had an ALA, it had the same rights to develop new processors as Nuvia anyway. Or it could have claimed that the Snapdragon 8 Elite wasn’t actually based on existing Nuvia designs at all (good luck with that), so was covered by the Qualcomm ALA. 

The defence is no longer available, and so it makes it hard to see how Qualcomm can legally continue shipping Snapdragon 8 Elite. Unless, of course, it comes to a costly agreement with ARM in the next 60 days. 

My money is on the money changing hands.