Apple announced a multi-billion dollar deal with Broadcom to use US-made chips, strengthening their existing partnership. In particular, the deal involves Broadcom developing and building 5G radio frequency components, including film bulk acoustic resonator (FBAR) chips, at facilities like the one in Fort Collins, Colorado. These FBAR chips are crucial for connecting iPhones and other Apple devices to mobile data networks. This agreement is part of Apple's broader strategy to deepen its investments in the US economy and diversify its supply chains.
The long-term nature of this agreement, extending to 2031, provides supply-chain certainty for Apple amidst industry-wide chip scarcity. For Broadcom, which generates approximately 20% of its annual revenue from Apple, the deal removes concerns that Apple might develop these components in-house. It also underscores Apple's continued reliance on Broadcom for complex custom silicon despite its efforts to design its own modems and processors. The announcement led to Broadcom's shares rising, hitting a record high.
The initial agreement in May 2023 was a multi-billion dollar deal for Broadcom to develop and manufacture 5G radio frequency components. Subsequently, in July 2023, Broadcom expanded this partnership through 2031 to include the development and supply of a range of custom ASIC silicon products for use in multiple generations of Apple products. This move ensures Apple's access to critical components, many of which are US-made, thereby mitigating geopolitical risks and potential supply chain disruptions.
While Apple designs its application processors and relies on TSMC for these, it still depends on Broadcom for specialized components like radio frequency chips for cellular, Wi-Fi, and Bluetooth connectivity. This long-term commitment allows Apple to secure components during periods of high demand, such as those driven by AI, which has strained TSMC's capacity. Apple's CEO Tim Cook has emphasized the company's efforts to advance American supply chain innovation, including substantial investments in US manufacturing and technology hubs for silicon production.
Analysts view this extended partnership as mutually beneficial. For Apple, it guarantees a steady supply of essential chips, insulating it from potential shortages. For Broadcom, it provides revenue stability and reinforces its position as a vital technology partner to one of the world's largest consumer electronics companies, easing investor concerns about Apple potentially transitioning to in-house chip production for these specific components.
