According to Bloomberg, this development could cause significant disruption to the global smartphone industry, where Arm’s chip designs are integral, powering devices across a broad range of performance tiers.

Qualcomm has accused the company of attempting to "strong-arm" it during the legal proceedings.

The core issue revolves around Qualcomm’s acquisition of Nuvia in 2021, a move aimed at diversifying its business beyond smartphones and into laptops. Arm contends that Qualcomm should have renegotiated the licensing agreement for chip designs after the acquisition, a point of contention that led to Arm suing Qualcomm.

Qualcomm, however, remains confident that the termination threat will not affect its operations, as the two companies continue their legal battle over the licence terms.

Qualcomm, which generated $18.8 billion in smartphone-related revenue in the nine months leading to June 2023, has long sought to reduce its reliance on the volatile smartphone market, which leaves the company vulnerable to fluctuations in consumer spending, particularly in China.

As part of its diversification strategy, Qualcomm acquired Nuvia to break into the laptop market, an area significantly disrupted by Apple's launch of its M1 processor in 2020—the first major change to MacBook processors in 14 years.

Following the Nuvia acquisition, Arm argued that Qualcomm’s existing chip design licences were not transferable without Arm’s approval, a stance that led to the lawsuit.

According to Bloomberg, Arm has now issued Qualcomm with a 60-day notice of its intention to cancel the company's licence, raising the stakes in the dispute.

Qualcomm's Oryon CPU, a pivotal element of its expansion into the laptop market, lies at the heart of the disagreement.

Arm’s chip designs are essential to the global semiconductor industry, with 28.6 billion chips using its designs shipped in 2023. The company also commands 99 per cent of the $30 billion mobile application royalty market, making any potential licence termination a significant issue for both companies.

Qualcomm has expressed confidence that its "rights under its agreement with Arm will be affirmed." The firm described Arm’s move as "an attempt to disrupt the legal process" and called the termination threat "completely baseless."