*

Arm claims Qualcomm ( QCOM ) used its technology without permission

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Arm CEO: Company has not yet made its own chip, still

evaluating

future strategies

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Qualcomm ( QCOM ) alleges Arm viewed it as a competitor

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Qualcomm ( QCOM ) CEO might testify

(Rewrites throughout with new testimony and documents from

Arm's chief executive)

By Tom Hals and Max A. Cherney

WILMINGTON, Delaware, Dec 16 (Reuters) - The chief

executive of Arm on Monday downplayed the

company's ambitions to become a chip supplier in its own right

at a trial against Qualcomm ( QCOM ), a major customer that pays Arm an

estimated hundreds of millions of dollars per year.

The crux of the litigation is a clash over Qualcomm's ( QCOM )

license agreement for the use of Arm's intellectual property

following Qualcomm's ( QCOM ) $1.4 billion acquisition of chip startup

Nuvia in 2021.

The remedy Arm is seeking in the case is the destruction

of Nuvia's designs, which it alleges form the basis of the

low-powered AI PC chips that Nuvia's executive team helped

Qualcomm ( QCOM ) design. Microsoft ( MSFT ) and others expect those

chips, launched earlier this year, will help the Windows

operating system regain ground lost to laptops made by Apple.

Arm is central to the chip industry, licensing out

underlying technology to almost every company in the industry as

a neutral player. The British firm alleged that Qualcomm ( QCOM ) was

required to honor Nuvia's royalty rates for the chip designs it

was using in Qualcomm's ( QCOM ) chips, rather than paying Qualcomm's ( QCOM )

much lower rates.

At the trial in U.S. federal court in Delaware on

Monday, jurors were shown documents that indicated Nuvia's

royalty rates were "many multiples" more than Qualcomm's ( QCOM ), and

allowing Qualcomm ( QCOM ) to pay the lower rates would have damaged

Arm's business model.

Qualcomm's ( QCOM ) acquisition of Nuvia potentially trimmed $50

million from Arm revenue, according to estimates in internal

documents that were shown to the jury.

"We've never had an issue like this," Haas told the

court.

During a cross-examination of Haas, Qualcomm's ( QCOM ) attorney

tried to portray the royalty dispute with Qualcomm ( QCOM ) as part of a

strategy for Arm to confront a customer that it increasingly

viewed as a competitor.

Qualcomm's ( QCOM ) legal team showed a document that Haas prepared

for Arm's board outlining a strategy for Arm to start designing

its own chips, which would pit it against Qualcomm ( QCOM ) and other Arm

customers.

Haas was dismissive of the documents. He said that Arm

doesn't build chips and never got into the business but said he

is always considering various possible strategies.

"That's all I think about, is the future," he told the

eight-person jury.

Qualcomm's ( QCOM ) attorneys also questioned Haas over letters

that Arm sent to dozens of Qualcomm's ( QCOM ) customers, including

Samsung Electronics ( SSNLF ). The letters said the Arm

dispute could result in the forced destruction of Nuvia

technology, against Qualcomm's ( QCOM ) demands.

A Qualcomm ( QCOM ) attorney called those letters "misleading"

and many chip industry insiders have wondered whether Arm's

appetite for destruction would disrupt Qualcomm's ( QCOM ) ability to

supply chips to the PC industry.

"I felt we had a reason," Haas said. "We were getting

lots of questions from partners and customers at almost every

meeting with senior executives."

Arm is expected to call its final witnesses on Tuesday

and show some video from depositions before it rests. Qualcomm ( QCOM )

might call its CEO Cristiano Amon.

The judge indicated on Monday that the jury might begin

deliberations as soon as Thursday.

Arm has not asked for monetary damages. According to

Bernstein analyst Stacy Rasgon, Qualcomm ( QCOM ) pays Arm roughly $300

million a year in fees.

Britain-based Arm is owned by SoftBank Group, which

listed Arm in the U.S. in 2023.