Thursday, July 18, 2024
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Apple expands US chip sourcing with multibillion-dollar Broadcom deal

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Apple and Broadcom have inked a “multibillion-dollar” agreement for the chip company to provide 5G components to the iPhone maker in Colorado and other parts of the US, Apple to source more parts from US facilities as part of the push.

Apple said the partnership, which focuses on 5G radio frequency components and builds on its existing relationship with Broadcom, was part of its 2021 commitment to spend $430bn with US suppliers and manufacturers over five years.

Broadcom confirmed in a regulatory filing that it had entered into two “multi-year work statements” to supply high-performance radio frequency and wireless components to Apple.

Broadcom shares rose nearly 1 percent to $682.82 in early trading in New York on news of the deal. Apple’s stock slipped 0.7 percent, ending its gain of 33 percent for the year and giving it a market capitalization of $2.7 trillion.

Apple usually reveals little about the suppliers it works with, but the tech conglomerate has recently come under scrutiny for its reliance on Chinese manufacturers and components, at a time when the deterioration of US-China relations has caused silicon Valley companies are at risk of being left as collateral damage.

The iPhone maker said Broadcom’s “state-of-the-art wireless connectivity components” will be “designed and manufactured in several major US manufacturing and technology centers, including Fort Collins, Colorado.”

“All of Apple’s products rely on technology designed and built here in America,” Apple CEO Tim Cook said in a statement. “We will continue to deepen our investments in the American economy because of our unwavering faith in America’s future.”

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Apple is Broadcom’s biggest customer, accounting for about 20 percent of the chip group’s annual sales last year.

Hock Tan, the chipmaker’s chief executive, admitted this year in an interview with the Financial Times that Apple was working to develop its own in-house wireless components to replace some provided by Broadcom. However, he added that he was “confident that I could out-engineer them”.

Since launching the first iPhone processor designed in-house in 2010, Apple has steadily expanded its silicon ambitions, adding its own chips for Macs and for accessories like AirPods and the Apple Watch. Qualcomm, another supplier of wireless chips to Apple, has said it expects the first iPhone without a 5G modem to arrive as soon as next year.