The dispute between Arm and Qualcomm, the two companies whose designs sit inside nearly every smartphone on Earth, returned to a Delaware federal courtroom this week, and the argument came down to a single piece of paper.
The trial before Judge Maryellen Noreika opened October 5, with the jury portion expected to run about five days. Qualcomm’s claim is blunt: that Arm failed to supply chip-testing tools required by their contract and leaked a 2024 threat to cancel a license, which shrank a chip deal with Meta by $170 million.
For that, Qualcomm is asking to stop paying royalties for up to five years. Reuters calculates the free period would be worth billions of dollars, roughly 70% of the remaining life of the license. Arm denies any breach.
The deeper fight is about price. Qualcomm’s lawyers repeatedly showed the court a chart that, they said, illustrated Arm’s plan to raise the royalty rate from its v9 architecture to the coming v10 by 1,800%. The 2013 agreement, Qualcomm argues, caps the per-chip royalty at $1.88, a ceiling the company says Arm is trying to blow through.
Arm disputes that reading. The company has said its contract terms are clear and that Qualcomm is using the litigation to force a better deal than the one it signed. The judge has not yet ruled on whether the royalty-free remedy even reaches the jury.
The case matters because Arm’s business model is changing. For years Arm made money by licensing chip designs and collecting a small royalty on each chip sold, a formula that made it the neutral supplier to an entire industry. Now, as chips grow more complex and AI demand pushes prices up, Arm has been trying to capture more value from each device, and Qualcomm has been resisting.
The two companies have been circling each other for years. Arm listed in 2023 after a failed takeover by Nvidia collapsed under regulatory pressure, and its chief executive, Rene Haas, has been explicit that he wants to charge more for Arm’s designs as devices grow more capable. Qualcomm, which acquired the chip startup Nuvia in 2021 to power its PC and automotive ambitions, has chafed at those higher rates.
Qualcomm is one of Arm’s largest customers and one of the few with the resources to fight. Its Snapdragon chips power a large share of Android phones and are moving into PCs and cars. A five-year royalty holiday would be a meaningful shift of money from Arm’s books to Qualcomm’s.
The dispute has already reshaped the two companies’ relationship. Arm once threatened to cancel Qualcomm’s license outright, a move that would have forced Qualcomm to stop shipping key products. A Delaware jury sided with Qualcomm in an earlier phase of that fight over Nuvia technology, a setback that has made the companies’ dealings colder and more litigious. That history hangs over the current trial.
For the rest of the chip industry, the outcome sets a template. Arm licenses its designs to Apple, Samsung, MediaTek and hundreds of others, and every one of them is watching to see whether Arm can reset its prices upward or whether a big customer can force them back down. The $1.88 cap, if it stands, limits Arm’s pricing power across the board.
The trial is also a test of whether Arm’s push into higher-margin, higher-price contracts can survive contact with its oldest customer. Arm has said it wants to sell more complete chip designs and charge more for them; Qualcomm wants to keep the cheap licenses it signed a decade ago.
The fight is as much about the next decade of the smartphone as about the last one. Arm earns a few cents on nearly every chip sold, and the royalty it charges on a flagship smartphone processor is a rounding error compared with what the phone sells for. As AI moves onto phones and PCs, Arm argues its designs are doing more of the work and deserve more of the price. Qualcomm’s counter is that it paid for those designs and built the chips around them, and that Arm is trying to tax its customers’ success. The chart in the courtroom is the cleanest version of the dispute: a line that rises 1,800% from one generation to the next. Whether that line reflects Arm’s ambition or Qualcomm’s exaggeration is precisely what the jury is being asked to sort out. Both companies have said they want to keep working together, but the trial makes plain how far apart their views of a fair price have moved.
A verdict is weeks away, and either side can appeal. But the case has already exposed the tension at the center of the chip industry’s most profitable franchise: a supplier that wants more for its work, and a customer that remembers when the price was fixed, in writing, at $1.88 a chip.
