Broadcom announced on July 6 that it will expand its partnership with Apple through 2031 to develop and supply custom chips, solidifying its role as a key supplier to the iPhone maker. This extended agreement involves Broadcom developing and providing a range of custom ASIC (application-specific integrated circuit) silicon products for multiple generations of Apple devices. The deal is seen as a win-win, easing investor fears that Apple would in-source these components and providing Apple with supply-chain certainty, especially given current chip scarcities.
Apple, which accounts for approximately 20% of Broadcom's annual revenue, will utilize Broadcom's technology in its own dedicated AI server chips, codenamed Baltra, for deployment by 2027. These servers are designed to power cloud-based Apple Intelligence features for generating advanced text and images and summarizing information. While Apple has been bringing some chip design in-house, such as its own combined Wi-Fi and Bluetooth chips, Broadcom remains essential for complex custom silicon, particularly for components related to cellular networking and AI infrastructure development.
Broadcom's shares jumped more than 3% following the announcement, reflecting investor reassurance given Apple's past efforts to develop its own chips. The collaboration builds on a multibillion-dollar agreement from 2023 for 5G radio frequency components. The demand for advanced processors, driven by the boom in artificial intelligence, has made custom chips crucial, and this extended partnership positions both companies strategically in this evolving market.
