(This Dec. 16 story has been refiled to add Arm CEO’s full name and designation in paragraph 7)
By Tom Hals and Max A. Cherney
WILMINGTON, Delaware (Reuters) – Arm’s CEO on Monday downplayed the company’s ambitions to become a chip supplier in its own right during a lawsuit against Qualcomm (NASDAQ:), a major customer that Arm is estimated to be paying hundreds of millions of dollars. per year.
At the heart of the lawsuit is a clash over Qualcomm’s licensing agreement for use of Arm’s intellectual property following Qualcomm’s $1.4 billion acquisition of chip startup Nuvia in 2021.
The remedy Arm is seeking in this case is the destruction of Nuvia’s designs, which it claims form the basis of the low-power AI PC chips that Nuvia’s management team helped Qualcomm design. Microsoft (NASDAQ:) and others expect these chips, which launched earlier this year, will help the Windows operating system regain ground lost to Apple (NASDAQ:) laptops.
Arm plays a central role in the chip industry, licensing the underlying technology to almost every company in the industry as a neutral player. The British company claimed that Qualcomm was obliged to honor Nuvia’s royalty rates for the chip designs it used in Qualcomm’s chips, rather than pay Qualcomm’s much lower rates.
During the trial in U.S. federal court in Delaware on Monday, jurors were shown documents showing that Nuvia’s royalty rates were “many multiples” higher than Qualcomm’s, and that allowing Qualcomm to pay the lower rates would would have harmed Arm’s business model.
Qualcomm’s acquisition of Nuvia could have wiped out $50 million in Arm revenue, according to estimates in internal documents shown to the jury.
“We’ve never had a problem like this before,” Arm CEO Rene Haas told the court.
Under cross-examination from Haas, Qualcomm’s attorney tried to portray the royalty dispute with Qualcomm as part of a strategy for Arm to confront a customer it increasingly viewed as a competitor.
Qualcomm’s legal team showed a document Haas had prepared for Arm’s board that outlined a strategy for Arm to start designing its own chips, which would pit the company against Qualcomm and other Arm customers.
Haas was dismissive of the documents. He said Arm doesn’t build chips and has never gotten into the business, but he’s always considering different possible strategies.
“That’s all I think about, the future,” he told the eight-member jury.
Qualcomm’s lawyers also questioned Haas about letters Arm sent to dozens of Qualcomm customers, including Samsung Electronics (KS:). The letters stated that the Arm dispute could result in the forced destruction of the Nuvia technology, against Qualcomm’s demands.
A lawyer for Qualcomm called these letters “misleading,” and many chip industry insiders have wondered whether Arm’s thirst for destruction would disrupt Qualcomm’s ability to supply chips to the PC industry.
“I felt like we had a reason,” Haas said. “At almost every meeting with senior executives, we received many questions from partners and customers.”
Arm is expected to call its final witnesses on Tuesday and show some videos of statements before resting. Qualcomm could name its CEO Cristiano Amon.
The judge indicated on Monday that the jury could begin deliberations as early as Thursday.
Arm has not sought monetary damages. According to Bernstein analyst Stacy Rasgon, Qualcomm pays Arm about $300 million a year in fees.
British-based Arm is owned by SoftBank (TYO:) Group, which listed Arm in the US in 2023.
