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Nuvia acquisition intended to boost Qualcomm's ( QCOM ) PC market

entry

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Arm disputes Qualcomm's ( QCOM ) use of Nuvia technology, demanded

destruction

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Trial closing arguments set for Thursday

By Tom Hals

WILMINGTON, Delaware, Dec 18 (Reuters) - Internal

Qualcomm documents showed the chip firm estimated it

could eventually save as much as $1.4 billion a year on payments

to Arm by purchasing a little-known startup in

2021, according to evidence shown at a trial on Wednesday.

The projection surfaced while Qualcomm ( QCOM ) CEO Cristiano Amon

was testifying to a jury in Delaware federal court about his

firm's rationale for purchasing Nuvia for $1.4 billion in 2021.

"It justified the acquisition," he said of the potential

savings on royalty payments to Arm.

The chip firm's CEO was testifying as part of a trial to

resolve claims that Arm can force Qualcomm ( QCOM ) to destroy the

technology it acquired because Arm never consented to the

transfer of Nuvia's license agreements.

Qualcomm ( QCOM ) has used the technology and talent it acquired from

Nuvia to spearhead its push into the PC market, where it is

hoping to help Microsoft's ( MSFT ) Windows ecosystem claw back

market share lost to Apple ( AAPL ) in recent years.

Amon's testimony on Wednesday described how relations

between Arm and Qualcomm ( QCOM ), Arm's biggest customer, began to

curdle years before the court dispute between the two firms. In

the 2010s, Qualcomm ( QCOM ) stopped designing its own computing cores

and decided to purchase designs off the shelf from Arm.

Near the end of the decade, Qualcomm ( QCOM ) believed the technology

it was buying from Arm was causing it to fall behind Apple ( AAPL ) in

the smartphone market at the same time Amon saw an opportunity

to challenge Intel ( INTC ) in the laptop market. But Qualcomm ( QCOM )

had no viable plan for developing its own computing cores to

lessen its dependence on Arm, Amon testified.

That changed when a team of ex-Apple ( AAPL ) engineers who had

helped design the iPhone maker's flagship chips founded their

own startup in 2019 called Nuvia. After trying without success

to persuade Nuvia to develop computing cores for Qualcomm ( QCOM ), Amon

decided the best path was to buy the young company.

Qualcomm ( QCOM ) faced a challenge in justifying the deal. While

Nuvia had designs and sought-after talent, it lacked a finished

product and was focused on the server market, not laptops and

mobile devices.

To justify spending hundreds of millions of dollars or more

for the firm, Amon told Qualcomm's ( QCOM ) board that the company could

eventually save as much as $1.4 billion per year on payments to

Arm by switching away from Arm's computing core designs to those

based on work by Nuvia and its team.

The $1.4 billion a year of theoretical savings was based on

the expectation that Qualcomm ( QCOM ) would enter a massive new market

for PC chips that would require similarly massive payments to

Arm for the use of its technology.

That figure is far higher than the $50 million reduction in

revenue from Qualcomm ( QCOM ) that Arm executives feared when the Nuvia

deal was announced.

Analysts have estimated that Qualcomm ( QCOM ) currently pays Arm

about $300 million a year, though that figure does not take into

account possible Qualcomm ( QCOM ) expansions into new markets.

Amon said he believed Qualcomm ( QCOM ) would be free to start using

Nuvia's technology because both Nuvia and Qualcomm ( QCOM ) had their own

licenses to build computing cores that would be compatible with

Arm's underlying computer architecture.

Arm's executives objected and eventually terminated Nuvia's

license, demanding that Qualcomm ( QCOM ) destroy all Nuvia technology

that was developed with it.

Closing arguments in the trial are expected on Thursday.