Qualcomm (NASDAQ:QCOM) shares fell by more than 2% in pre-market today following reports that longtime partner Arm Holdings (NASDAQ:ARM) plans to revoke a key architectural license that allows Qualcomm to use Arm’s intellectual property for designing chips. The potential termination of this agreement could have serious implications for Qualcomm’s business.
Arm issued Qualcomm a 60-day notice, signaling its intent to cancel the license agreement. Qualcomm, like many other semiconductor companies, relies heavily on Arm’s instruction sets to develop the chips that power a large portion of mobile devices.
The news also affected Arm’s US-listed shares, which saw a decline of nearly 3% in pre-market today.
If Arm follows through with the cancellation, Qualcomm could face significant disruption. The company, which produces hundreds of millions of chips annually, generates about $39 billion in revenue from products using Arm’s technology. A forced cessation of sales or potential legal battles could create widespread consequences for the global smartphone industry, further shaking investor confidence.