Qualcomm (NASDAQ:QCOM) is facing a significant challenge as Arm Holdings (NASDAQ:ARM) has issued a 60-day notice to cancel its architectural license, a move that could severely disrupt Qualcomm's chip design operations. According to a report by Bloomberg, Arm's action stems from a legal dispute over Qualcomm's acquisition of Nuvia in 2021. The cancellation could force Qualcomm to halt the sale of products that account for much of its $39 billion in revenue, potentially causing major ripples across the smartphone and personal computer markets.

This legal showdown, which began when Arm sued Qualcomm in 2022, revolves around the company's use of Arm's intellectual property in its Nuvia-designed chips for PCs and AI-based laptops. Arm contends that Qualcomm should have renegotiated its licensing agreement post-acquisition, a point of contention leading to the threat of license termination. Qualcomm has pushed back, calling the move baseless and an attempt to "strong-arm" a longtime partner ahead of their December trial.

The stakes are high for both companies. Qualcomm, which supplies processors for a large portion of Android smartphones, could face significant delays and setbacks if forced to cease its custom chip designs. Meanwhile, analysts believe this dispute could end in a negotiated settlement, but at potentially higher royalty rates to be paid by Qualcomm moving forward.

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