Do you think that Qualcomm bought Nuvia with the expectation that Nuvia's royalty agreement would remain intact? Perhaps they wouldn't have paid as much, or purchased them at all if the license is able to be terminated in that way.

I have no idea of the specifics of Nuvia's license.

But it's totally common for corporations to make value-destroying acquisitions. Some research suggests 60%-90% of mergers actually reduce shareholder value. Look at the HP/Autonomy acquisition, for example - where the "due diligence" managed to overlook a $5 billion black hole in a $10 billion deal. And how often have we seen a big tech co acquire a startup only to shut it down?

Mergers only seem rational because once a mistake is set in stone, the CEO usually has to put a brave face on it and declare it a big success.

I could certainly believe during the acquisition process that the specifics of Nuvia's license were overlooked, or not fully understood by the person who read them.

Then, they should have done their homework because any transferability clause would be in Nuvia’s licensing agreement.

Or maybe there is no such language in the contract and Arm is over-extending, but that sounds unlikely.

> and they think they should keep the IP from the Nuvia license

Incorrect according to Qualcomm. They claim Snapdragon X Elite & other cores are from scratch rebuilds, not using any of the design used for Nuvia.

They did however use engineers who had designed Nuvia. So there may be a noted resemblance in places. Latest Tech Poutine: 'you can't delete your mind.'

Reasonably sure that Qualcomm aren’t claiming their X Elite cores are free of Nuvia created IP. Rather that Arm can’t prevent the transfer of that IP to Qualcomm.

The linked article says: "However, says Arm, it appeared from subsequent press reports that Qualcomm may not have destroyed the core designs and still intended to use the blueprints and technology it acquired with Nuvia"

Obviously it's hard to know for sure - it could even be an Anthony Levandowski type situation, where an ambitious employee passes off an unauthorised personal copy as their own work without Qualcomm realising.

That's all routine though. This kind of license negotiation happens all the time, in every industry. Companies need to work together to sell their products. And almost always it ends up just being rolled into whatever the next contract they write is. Very occasionally, it ends up in court and one side settles once it's clear which direction the wind is blowing.

But getting to the point where a supplier of critical infrastructure pulls a figurative knife on one of their biggest customers for no particularly obvious reason is just insane. ARM Ltd. absolutely loses here (Qualcomm does too, obviously), in pretty much any analysis. Their other licensees are watching carefully and thinking hard about future product directions.

See, this is one of the downsides of running an IP based business.

If you're selling physical chips and customer decides not to pay for their last shipment, you stop sending them chips. No need to get the courts involved; the customer can pay, negotiate, or do without.

But when you're selling IP and a customer decides not to pay? You can't stop them making chips using your IP, except by going through the courts. And when you do, people think you're "pulling a figurative knife on one of your biggest customers for no reason"

That's true enough, but you can refuse to license them for their next product, which is (or should be) incentive enough. Selling silicon IP blocks is a very mature industry, ARM is one of many such companies, and no one else is out there throwing doomsday bombs like this. Really, this is extremely weird.

> but you can refuse to license them for their next product

That might not be legally possible - or deemed to be anticompetitive. Cancelling an existing license if a firm has breached it would probably be less problematic.

My understanding is that it's the other way around.

- Qualcom has a "Technology license". Because ARM design the entire chip under that license, ARM charge a premium royalty.

- Nuvia had an "Architectural licence" (the more basic licence). Nuvia then had to design the chip around that foundation architecture (i.e. Nuvia did more work). The architectural license has a lower royalty.

Qualcom decided they were using Nuvia chips, and therefore should pay Nuvia's lower royalty rate.

ARM decided that Nuvia's chips were more or less ARM technology chips, or possibly that Nuvia's license couldn't be transferred, and therefore the higher royalty rate applied.

No. Both Qualcomm and Nuvia had an ALA = "Architecture License Agreement". Qualcomm had also licensed many ARM-designed cores separately.

An ALA signed with ARM gives the right to design CPU cores that are conformant to the Arm Architecture specification. When the CPU cores that are designed thus are sold, a royalty must be paid to ARM.

The royalties negotiated by Nuvia were much higher than those negotiated by Qualcomm, presumably based on the fact that Qualcomm sells a huge number of CPU cores, while Nuvia was expected to sell few, if any.

When Qualcomm has bought Nuvia, ARM has requested that Qualcomm shall pay the royalties specified by the Nuvia ALA, for any CPU cores that are derived in any way from work done at Nuvia. Qualcomm has refused, claiming that they should pay the smaller royalties specified by the Qualcomm ALA.

Then ARM has cancelled the Nuvia ALA, so they claim that any cores designed by Qualcomm that are derived from work done at Nuvia are unlicensed, so Qualcomm must stop any such design work, destroy all design data and obviously stop selling any products containing such CPU cores.

The trial date is in December and ARM has given an advance notice that they will also cancel the Qualcomm ALA some time shortly after the trial. So this will have no effect for now, it is just a means to put more pressure on Qualcomm, so they might accept a settlement before the trial.

Qualcomm buying Nuvia should increase the revenue for ARM from the work done at Nuvia, because Qualcomm will sell far more CPU cores than Nuvia, so even with smaller royalties the revenue for ARM will be greater.

Therefore the reason why ARM does not accept this deal is because in parallel their revenue from the ARM-designed cores licensed to Qualcomm would drop soon to zero. Qualcomm has announced that they will replace the ARM-designed cores in all their products, from smartphones and laptops to automotive CPUs.

Not quite. Qualcomm had an existing architecture license but with lower royalty rates than Nuvia’s. They claim they can sell Nuvia derived designs under that license with it’s lower royalty rates.

Thanks for the clarification! :-)

Maybe? The article I quoted was a big vague on that point, only mentioning "chip blueprints" which is pretty ambiguous.

However, some sources [1] say the "architectural license" is "higher license fee, fewer use constraints, greater commercial and technical interaction"

There are often two parts to the cost of these licenses - an upfront fee, and a per-chip royalty. So it could be both at the same time: Nuvia, who made few chips, might have negotiated a lower upfront fee and a higher per-chip royalty. Whereas Qualcomm, who make lots of chips, might have prioritised a lower per-chip royalty, even if the upfront fee was greater.

[1] https://www.anandtech.com/show/7112/the-arm-diaries-part-1-h...