Apple expands US chip sourcing with multibillion-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 said the partnership, which centres 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 “multiyear statements of work” for the supply of high-performance radio frequency and wireless components to Apple.

Shares in Broadcom closed up 1.2 per cent to $686.50 in New York on news of the deal. Apple’s stock slipped 1.5 per cent, giving it a market capitalisation of $2.7tn.

Apple typically discloses very little about the suppliers it works with, but the tech group has recently come under scrutiny for its reliance on Chinese manufacturers and components when deteriorating US-China relations risk leaving Silicon Valley companies as collateral damage.

The iPhone maker said Broadcom’s “cutting-edge wireless connectivity components” would be “designed and built in several key American manufacturing and technology hubs, including Fort Collins, Colorado”.

“All of Apple’s products depend on technology engineered and built here in the US,” said Tim Cook, Apple’s chief executive, in a statement. “We’ll continue to deepen our investments in the US economy because we have an unshakeable belief in America’s future.”

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

Apple had been working to develop its own in-house wireless components to replace some of those provided by Broadcom, the chipmaker’s chief executive Hock Tan conceded this year in an interview with the Financial Times. However, he said he was “confident I can out-engineer them”.

Since launching the first iPhone processors designed in-house in 2010, Apple has steadily expanded its silicon ambitions, adding its own chips for Macs and for accessories such as AirPods and Apple Watch. Qualcomm, another supplier of wireless chips to Apple, has said it expected the first iPhones to ship without its 5G modems to come as soon as next year.

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