Arm Could Change Licensing Model to Charge OEMs Directly

[AleksandarK]

Over the past few weeks, the legal dispute between Arm Ltd. and Qualcomm Inc. has been warming up the eyes of the entire tech community. However, as per the latest court filing, Arm could change its licensing strategy and shift its whole business model into a new direction that would benefit the company directly. Currently, the company provides the intellectual property (IP) that chip makers can use and add to designs mixed with other IPs and custom in-house solutions. That is how the world of electronics design (EDA) works and how many companies operate. However, in the Qualcomm-Arm legal battle, Qualcomm's counterclaim has brought new light about Arm's plans for licensing its hardware designs past 2024.

According to Dylan Patel of SemiAnalysis, who examined court documents, Arm will reportedly change terms to use its IP where the use of other IP mixed with Arm IP is prohibited. If a chip maker plans to use Arm CPU IP, they must also use Arm's GPU/NPU/ISP/DSP IPs. This would result in devices that utilize every design the UK-based designer has to offer, and other IP makers will have to exclude their designs from the SoC. By doing this, Arm directly stands against deals like the Samsung-AMD deal, where AMD provides RDNA GPU IP and would force Samsung to use Arm's Mali GPU IP instead. This change should take effect in 2025 when every new license agreement has to comply with new rules.




As far as Arm license holders like NVIDIA and Apple, they are excluded from this as NVIDIA has a 20-year license contract established on older "normal" terms, and Apple is one of the founders of Arm ISA, so Arm Ltd. will likely not impose any new action on one of its biggest customers.

In the snippet below, you can see Qualcomm's counterclaim that sheds light on Arm's upcoming plans to conduct business in a quote. Not every document part is seen, as some text is redacted.

Spoiler

Since filing the Complaint in this case on August 31, 2022, ARM has persistently and wrongfully attempted to disrupt Qualcomm's business and customer relationships by spreading misinformation about the nature of Qualcomm's ARM licenses to customers that purchase Qualcomm's ARM-compatible cores and chipsets.

ARM has engaged in this misinformation campaign directly through its leadership and through the leadership of its owner, SoftBank, acting on ARM's behalf, in an attempt to damage Qualcomm, disparage its products, disrupt Qualcomm's relationships with its customers, and create uncertainty where there is none.

At least as early as October 2022, ARM falsely stated to one or more of Qualcomm's longstanding original equipment manufacturer ("OEM") customers that unless they accept a new direct license from ARM on which they pay royalties based on the sales of the OEM's products, they will be unable to obtain ARM-compliant chips from 2025 forward. ARM has also threatened at least one OEM that, if the OEM does not do so, ARM will go on to license the OEM's large competitors instead—the implication being that the OEM would be excluded from the market and could not obtain any ARM-compliant chips from Qualcomm or any other supplier, including "off-the-shelf" chips from ARM under a TLA. ARM has done this despite already having approached the OEM's competitors with a direct licensing offer, while acting as if ARM would only approach the competing OEMs if the threatened OEM declined the license in the first instance.

ARM also told one or more Qualcomm customers that, when the existing TLA agreements expire, ARM will cease licensing CPUs to all semiconductor companies—including Qualcomm—under an ARM TLA. ARM claimed that it is changing its business model and will only provide licenses to the device-makers themselves. ARM has explained to the OEMs that a direct OEM license will be the only way for device-makers to get access to ARM-compliant chips.

ARM is trying to coerce such customers into accepting its direct license by falsely asserting that Qualcomm will not be able to provide them with ARM-compliant chips beginning in 2025 because Qualcomm's ARM license agreements terminate in 2024, that ARM will not extend its licenses with Qualcomm, and that ARM will not allow Qualcomm to ship products from 2025 forward.

These statements are unequivocally false and are intended to harm Qualcomm's relationships with its customers—and to secure lucrative contracts with those customers for ARM—by calling into question Qualcomm's ability to maintain its ARM licenses beyond 2024 and provide products to its customers, despite Qualcomm having a clear right to do so for years to come under its ARM licenses.

Qualcomm is licensed for several years past 2025 under its ALA, which provides Qualcomm with the unilateral right to extend the contract past the initial term for several more years. Specifically, the ALA states:
[REDACTED]
Accordingly, because the Qualcomm ALA has not been terminated—and because no event has occurred that would give rise to a right to terminate—the initial term of the license will continue until [REDACTED]. Qualcomm then has the right to extend the license until [REDACTED]. Accordingly, ARM does not have the right to refuse to extend Qualcomm's license or stop Qualcomm from shipping its products in 2025.

Moreover, ARM has no right to require additional royalties from Qualcomm's customers. Qualcomm's ALA provides Qualcomm with an exhaustive license, meaning that ARM is not entitled to go and seek another royalty from Qualcomm's customers on the same products for which ARM has received a royalty from Qualcomm.

ARM's coercion efforts did not stop with these false statements about Qualcomm's license agreements. To apply more pressure, ARM further stated that Qualcomm and other semiconductor manufacturers will also not be able to provide OEM customers with other components of SoCs (such as graphics processing units ("GPU"), neural processing units ("NPU"), and image signal processor ("ISP")), because ARM plans to tie licensing of those components to the device-maker CPU license.

ARM also claimed that it had already informed Qualcomm about its new business model that requires a direct license with the OEMs. That statement is false. ARM has not notified Qualcomm that it will be requiring direct licenses from device-makers. ARM did not tell Qualcomm that it intends to stop licensing CPU technology as a standalone license, that it will no longer license CPU technology to semiconductor companies, or that it will require licensees to obtain other technologies (notably ARM's GPU and NPU technology) only from ARM. As noted above, these attempted or threatened changes in ARM's business model do not account for Qualcomm's existing agreements with ARM.

While ARM's statements about Qualcomm have no basis in fact, they cause significant reputational damage and harm Qualcomm's customer relationships. Moreover, while ARM's goal may be to harm Qualcomm—and to coerce contracts with Qualcomm's customer that are unnecessary in view of the fully exhaustive rights it has granted Qualcomm under its contracts—its tactics will result in harm to ARM's customers and licensees throughout the industry.

View at TechPowerUp Main Site | Source

 

[yeeeeman]

who is the idiot at arm that decided this?
I assume it's some sort of financial expert that doesn't understand how this market works.

 

[RedBear]

who is the idiot at arm that decided this?
I assume it's some sort of financial expert that doesn't understand how this market works.

According to the article on SemiAnalysis it might go beyond money and it might be more personal, maybe ARM/Softbank is taking revenge against Qualcomm for taking a strong position with regulators that contributed to the collapse of the Nvidia/SoftBank deal.

Either way, this will certainly result in accelerating the rise of RISC V, as the author of the article suggests.

 

[Mac the Geek]

Are we sure that Nvidia's acquisition of Arm is completely dead?

Because this sounds like a page from Nvidia's book.

 

[Easo]

That... doesn't sound great at all.

 

[enzolt]

And this is one of the nails in ARM's coffin. RISC-V will be the ISA moving forward. History in the making folks...

 

[neatfeatguy]

Kind of sounds like a stupid move an anodizer we use for metal made about 8 months back. They decided to impose an upcharge that's tied to what they decide as being a "minimum requirement" for what goes into their tanks for anodizing.

Customers that don't have large orders of metal to have anodized are getting hit with massive upcharge costs, so those customers have been leaving this anodizer in droves and using other anodizers in the area to do the work. Now this anodizer is sitting around and twiddling their thumbs due to business having dropped off over 50%.

The idea was that they had a lot of customers that have small orders and they wanted to make more money off them by applying a minimum requirement charge so they're not just running small batches in their tanks. Well, this has horribly backfired on them. Having now lost so much business, I hear the anodizer is now entertaining the idea of removing the minimum requirement upcharge......but, it might be too little too late. With so many customers having moved their orders to other anodizers, they may never seen a solid return in business.

This decision by ARM may just bite them in the ass, but I guess we wait and see.

 

[Nanochip]

These strong arm tactics would’ve been worse if nvidia acquired the company. RISC-V may be a viable alternative after all.

 

[renz496]

Are we sure that Nvidia's acquisition of Arm is completely dead?

Because this sounds like a page from Nvidia's book.

Qualcomm did something like this long time ago with their so called "snapdragon package". plus despite Qualcomm among the big one that opposed the merge with nvidia they end up acquiring Nuvia that most likely going to compete with ARM solution in the future. also what happen to open consortium that being proposed by Qualcomm if ARM-nvidia merge to fail before?

 

[Tropick]

Kind of sounds like a stupid move an anodizer we use for metal made about 8 months back. They decided to impose an upcharge that's tied to what they decide as being a "minimum requirement" for what goes into their tanks for anodizing.

Customers that don't have large orders of metal to have anodized are getting hit with massive upcharge costs, so those customers have been leaving this anodizer in droves and using other anodizers in the area to do the work. Now this anodizer is sitting around and twiddling their thumbs due to business having dropped off over 50%.

The idea was that they had a lot of customers that have small orders and they wanted to make more money off them by applying a minimum requirement charge so they're not just running small batches in their tanks. Well, this has horribly backfired on them. Having now lost so much business, I hear the anodizer is now entertaining the idea of removing the minimum requirement upcharge......but, it might be too little too late. With so many customers having moved their orders to other anodizers, they may never seen a solid return in business.

This decision by ARM may just bite them in the ass, but I guess we wait and see.

Anodizer: You need to pay us this upcharge or take your business elsewhere!

Customer: okay

Anodizer:

 

[r9]

Nice push for RISCV.

 

[Denver]

who is the idiot at arm that decided this?
I assume it's some sort of financial expert that doesn't understand how this market works.

Someone quite stupid I would say, such a decision could easily fall under the anti-trust law, and also would encourage major players to seek alternatives such as RISC-V.

 

[Wirko]

RAMBUS is still best known as *the* IP troll - and it's because something they did some 20 years ago, and it doesn't matter that they have since contributed a lot to the development of DDR and HBM memory interfaces as well as PCIe.

Arm now has the opportunity to be remembered forever in a way that's quite similar.

 

[Minus Infinity]

I agree with the sentiment around here, this is a dangerous move and could backfire for ARM in the longer term. I would be looking for alternatives ARM going forward. Sort of the same dick move I would have expected from Huang if Nvidia got to buy ARM.

Will current clients speak up and tell ARM they won't agree to such a move. ARM is worth jack shit if no one buys their IP.

Again we see the problem with the tech world relying so heavily on 1 company. Same problem I see with TSMC that can raise prices willy nilly and companies have no choice but to comply, even Apple couldn't get them to back off on raising prices. And no with XI's reappointment and his inner circle of generals raising the threat oif invading Taiwan we are in for real trouble.

 

[PCL]

How does this not run afoul of antitrust laws? And more importantly, how does ARM think it's getting around that?

 

[trsttte]

Will current clients speak up and tell ARM they won't agree to such a move. ARM is worth jack shit if no one buys their IP.

Again we see the problem with the tech world relying so heavily on 1 company. Same problem I see with TSMC that can raise prices willy nilly and companies have no choice but to comply, even Apple couldn't get them to back off on raising prices. And no with XI's reappointment and his inner circle of generals raising the threat oif invading Taiwan we are in for real trouble.

It's not like their clients can move to something else on a whim, it takes a long time to move over to a new ISA, not to mention there's no competing architecture offering the same performance (Risc V still needs to mature a bit)

 

[robert3892]

Such an agreement would be in violation of anticompetitive laws in Europe and the USA

 

[medi01]

TSMC that can raise prices willy nilly and companies have no choice but to comply, even Apple couldn't get them

I don't get why people think that Apple is their biggest customer. Both NV and AMD should be bigger.

AMD"s semi-custom business alone likely eclipses all orders combined from Apple.

 

[Bomby569]

I don't get why people think that Apple is their biggest customer. Both NV and AMD should be bigger.

AMD"s semi-custom business alone likely eclipses all orders combined from Apple.

they are the biggest on the very high end, i guess that's were that confusion comes from

 

[thewan]

I'm surprised they mentioned mediatek and samsung. Mediatek uses mali on the majority of their products anyway. No big deal to switchover from Imagination, which doesn't power most of their important products anyway. samsung only switched to AMD recently, and it didn't turn out well anyway, so they might as well switch back to mali. samsung also may be quitting the phone soc market considering they are switching to using snapdragon in most of the regions now instead of their own soc. It may not matter for samsung if they completely switch to snapdragon.

the weird thing is how it doesn't mention qualcomm itself. does it not affect qualcomm using their own Adreno GPU? why is it not mentioned at all anywhere?

I don't get why people think that Apple is their biggest customer. Both NV and AMD should be bigger.

AMD"s semi-custom business alone likely eclipses all orders combined from Apple.

they are the biggest on the very high end, i guess that's were that confusion comes from

Its a fact. It is not a "think". Its not a confusion.

Apple is always on the latest node, therefore it doesn't matter they move less products than the competition(do they really?). They are always the first, or one of the first customers that utilize the latest and smallest process node available. So they pay the early adopter tax, plus their huge volume of phones and tablets and watches, and now PCs, it is very obvious they are the number 1 customer in terms of money. There are also news reports and leaks, and also market analysis that confirms those suspicions. Why don't you learn to google and you will find out these articles. These people have analyzed the market for many years with their accumulated experience, what advantage do you have against these people that what you say is right compared to these people you think are wrong?

 

[medi01]

Apple is always on the latest node, therefore it doesn't matter they move less products than the competition(do they really?)

They move products that are much smaller. I.e. A11-13 are about 85-100 square mms, when PS4 APU is about 350.

Apple sold about 220 million iphones in 2021. (besides the point, but Samsung sold 270)
AMD sold 470 million CPUs in the same period.

 

[Wirko]

Apple sold about 220 million iphones in 2021. (besides the point, but Samsung sold 270)
AMD sold 470 million CPUs in the same period.

What's your point here? Arm microcontrollers in AMD CPUs are far below Apple's cores in terms of performance and area, therefore also licensing costs.

If a chip maker plans to use Arm CPU IP, they must also use Arm's GPU/NPU/ISP/DSP IPs.

If we are to understand this too literally, AMD won't be allowed to pack Arm's cores on the same package as their own iGPU, fabric, avx512 ML acceleration instructions, and other stuff.

 

[medi01]

Arm microcontrollers in AMD CPUs

The point is being made about TSMC customers, not ARM's.

 

[RedBear]

the weird thing is how it doesn't mention qualcomm itself. does it not affect qualcomm using their own Adreno GPU? why is it not mentioned at all anywhere?

It's implicit, Qualcomm is denouncing ARM for allegedly lying about its license status after 2024 and Qualcomm itself is alleging that ARM wants to adopt this new licensing model, which would affect their existing SoCs and potentially whatever they wanted to develop for desktops and servers based on Lumia's IP.

 

[Wirko]

The point is being made about TSMC customers, not ARM's.

Yeah I see it now, it's a bit of a tangled debate here about the one and the other.