On Tuesday in Delaware, Judge Maryellen Noreika heard closing arguments in a nonjury proceeding focused on whether Arm's actions run afoul of California's unfair competition law. That hearing came on the heels of two jury verdicts in the wider fight: last week, a jury found Arm breached a licensing agreement with Qualcomm; and earlier this month, a different federal jury concluded that Arm violated an overarching licensing deal and attempted to undercut Qualcomm's relationships with customers, but awarded $2 in damages. Jurors also sided with Arm on four counts tied to a different licensing deal.
The companies have been partners even as they vie for position in computing semiconductors. Arm, majority-owned by SoftBank Group, sells chip designs and licenses an instruction set that lets software communicate with processors. Its architecture appears in everything from PCs to automobiles. Qualcomm supplies more chips than anyone else to smartphone manufacturers, including Samsung Electronics.
Qualcomm lawyer Karen Dunn said Arm has dragged out negotiations over licensing fees for v10, technology still in development that she said would support chips through 2040. She argued Arm must negotiate under its current contract "in good faith," yet when Arm has made v10 offers it has proposed "exorbitant" royalties in some cases 15 times what Qualcomm pays for the current generation.
Both parties said the current per-chip payment to Arm from Qualcomm is roughly $1.88 for most units. The exact v10 ask has not been disclosed and could vary by end product, ranging from handsets to data centers - a segment where Nvidia now leads and one that Arm and Qualcomm are both trying to break into. Dunn added that Qualcomm wants licensing terms similar to what Arm has offered Nvidia and Apple.
Arm's counsel Gregg LoCascio said its proposed v10 rates are based in part on what Google and Microsoft are paying. "If they really want to negotiate they could and they would," he said, arguing Qualcomm's claims reflect opposition to Arm evolving its business to compete. Another Arm lawyer, Jason Wilcox, said Arm's entry expands competition by giving customers more supplier options.
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Noreika showed little appetite to referee pricing. She labeled Qualcomm's bid to force negotiations "very, very drastic," saying it would require her to "sit here and play your moms." "You want me to regulate Arm's business based on a California statute," she said, later adding, "No one has appointed me the head of the FTC," which blocked Nvidia's bid for Arm in 2022.
She also pressed the economics, asking whether it matters if, hypothetically, Qualcomm's current licensing rates leave a profit margin near 99 percent while proposed v10 rates would bring that to about 75 percent. "Is it that Qualcomm can't afford it or it doesn't want to pay it?" she asked. The judge noted that Qualcomm brought its case via California's unfair-competition statute, not federal antitrust law, which imposes tougher thresholds. She further questioned how Arm's control of instruction sets affects competition, asking why Arm moving into chipmaking would not raise some of the same concerns that scuttled Nvidia's $22 billion deal for Arm in 2022.
A written ruling will come after both sides file final briefs, and the judge signaled it could take time. The backdrop: in a 2024 trial, a jury concluded Qualcomm did not breach a startup's contract with Arm when it aimed to deploy that technology in its chips without a higher fee following the Nuvia acquisition.
The bottom line: watch the balance between Arm's royalty model and Qualcomm's chip margins. With data center ambitions in play and $1.88 per-chip economics today, a shift in v10 rates could ripple through earnings trajectories on both sides, especially in markets currently dominated by Nvidia that each company is trying to enter.
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