According to a document seen by US financial news service Bloomberg, UK-based Arm, owned by Japanese mobile giant SoftBank, has given Qualcomm 60 days notice of the cancellation of their architectural license agreement, which allows Qualcomm to create chips based on Arm technology.

The looming legal dispute has already negatively affected the stocks of both companies, creating uncertainty in the smartphone and PC markets, where both companies are major players.

Qualcomm, known for its popular Snapdragon CPU chipsets, sells hundreds of millions of processors which are used in the majority of Android smartphones.

If the Arm license is cancelled, Qualcomm may be up for huge damages that may impact its top and bottom lines, while in turn Arm would lose one of its biggest clients.

The dispute stems from an acquisition made by Qualcomm in 2022 of a chip design startup called Nuvia, which was also an Arm licensee.

In a nutshell, Arm wants Qualcomm to pay more for its license to cover the activities of Nuvia, while Qualcomm has refused to renegotiate its contract.

Nuvia’s work on microprocessor design is incorporated in new personal computer chips that Qualcomm sells to global OEMs such as HP and Microsoft, where its processors are the key component to a new line of AI-focused laptops.

Qualcomm has also announced plans to incorporate Nuvia’s technology Oryon in its flagship Snapdragon chipset for smartphones.

Bloomberg analysts say Arm’s suit against Qualcomm will most likely end in a negotiated license, with Qualcomm paying a higher royalty rate than Nuvia had been paying for its license.