Qualcomm shares fell nearly 5% in premarket trade after Bloomberg reported that British chip designer Arm is looking to scrap a key license for the U.S. firm.
Arm has given Qualcomm a 60-day notice of the cancellation of their so-called architectural license agreement, Bloomberg reported, citing a document.
The license in question allows Qualcomm to design chips based on Arm architecture.
Arm, which is majority-owned by Japanese giant SoftBank, operates by effectively licensing blueprints that other companies use to design semiconductors.
CNBC has reached out to Qualcomm regarding the report. Arm declined to comment.
Qualcomm is one of the world’s largest players in the smartphone processor markets. Its chips are built into hundreds of millions of smartphones shipped annually.
More recently, the company has ramped up its efforts in the personal computing space with PC processors designed to run artificial intelligence applications.
Should the license cancellation take place, Qualcomm may have to stop selling products based on Arm designs.
A Qualcomm spokesperson told Bloomberg that Arm was trying to “strong-arm a longtime partner.” It “appears to be an attempt to disrupt the legal process, and its claim for termination is completely baseless,” the spokesperson added.
The two companies have been locked in a two-year legal battle focused on Nuvia, a firm Qualcomm acquired in 2021 that is an Arm licensee. Arm argues that Qualcomm should now renegotiate licensing terms with the British firm.