Qualcomm's Nuvia Acquisition Aimed to Slash Arm Royalty Payments, CEO Testifies

Qualcomm's $1.4 billion acquisition of Nuvia in 2021 was driven by the potential to significantly reduce royalty payments to Arm, CEO Cristiano Amon testified in a Delaware federal court on Wednesday, reports Reuters. Amon stated that the potential savings, estimated at up to $1.4 billion annually, justified the acquisition.

The trial centers on Arm's claim that Qualcomm must destroy the Nuvia technology because Arm did not consent to the transfer of Nuvia's license agreements. Qualcomm, meanwhile, argues that it is free to use Nuvia's technology, asserting that both Nuvia and Qualcomm possessed licenses to build computing cores compatible with Arm's architecture.

Amon's testimony detailed how Qualcomm's relationship with Arm, its largest customer, had soured in the years leading up to the Nuvia acquisition. In the 2010s, Qualcomm transitioned from designing its own computing cores to purchasing them from Arm. However, by the end of the decade, Qualcomm felt that Arm's technology was hindering its ability to compete with Apple in the smartphone market. Amon also saw an opportunity to challenge Intel in the laptop market, but Qualcomm lacked the capacity to develop its own competitive computing cores, lessening its dependence on Arm.

The emergence of Nuvia, founded by former Apple engineers who had worked on the iPhone's flagship chips, presented a potential solution. While Qualcomm initially attempted to partner with Nuvia, Amon ultimately decided that acquiring the company was the best course of action.

To justify the acquisition's significant cost, Amon presented a compelling argument to Qualcomm's board: the potential to save up to $1.4 billion annually in royalty payments to Arm by transitioning to Nuvia's computing core designs. This potential savings was based on the assumption that Qualcomm would enter a large new market for PC chips, requiring substantial payments to Arm for technology licensing.

This figure is significantly higher than the $50 million revenue reduction that Arm executives feared when the Nuvia deal was announced. Analysts estimate that Qualcomm currently pays Arm approximately $300 million annually, although this figure does not account for potential expansions into new markets.

Amon maintained that Qualcomm was justified in using Nuvia's technology, arguing that both Nuvia and Qualcomm held licenses to build compatible computing cores. Arm, however, objected to this assertion and ultimately terminated Nuvia's license, demanding that Qualcomm destroy all related technology.

Closing arguments in the trial are expected on Thursday.