Apple increases US chip sourcing through multi-billion dollar Broadcom deal

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

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

Broadcom confirmed, in a regulatory filing, that it had signed two “multiyear statement of work” agreements for the supply of radio frequency and wireless high-performance components to Apple.

Broadcom shares closed at $686.50, up 1.2 percent in New York following the announcement of the merger. Apple’s shares fell by 1.5 per cent to a market cap of $2.7tn.

Apple discloses little information about its suppliers, but recently the group has been criticized for its reliance upon Chinese components and manufacturers. This is because deteriorating US/China relations could leave Silicon Valley companies at risk of being collateral damage.

Broadcom, the iPhone maker, said that its “cutting edge wireless connectivity components” will be “designed in key American manufacturing and tech hubs including Fort Collins, Colorado”.

Tim Cook, Apple CEO, said in a press release that “all of Apple’s product depend on technology designed and built in the US.” We’ll continue to increase our investments in the US Economy because we are unwavering in our belief in America’s Future.

Apple was Broadcom’s biggest customer in the last year, with about 20% of its annual sales.

Hock Tan, Broadcom’s CEO admitted in an Interview with the Financial Times that Apple was working on its own wireless components. He said that he is “confident” he can “out-engineer them”.

Apple’s silicon ambitions have grown steadily since 2010, when it launched the first iPhones with processors that were designed by Apple. It has also added its own chips to Macs, as well as accessories like AirPods and Apple Watch. Qualcomm, a supplier of wireless chips for Apple, said that it expects the first iPhones without 5G modems will be available as early as next year.