Apple Inc. AAPL has been stepping up efforts to diversify away from chip suppliers and use its own silicon in its hardware devices.
What Happened: Apple is planning to replace a key part supplied by Broadcom Inc. AVGO with an in-house component by 2025, Bloomberg reported, citing people familiar with the matter.
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As part of the plan, the tech giant is looking to replace Qualcomm Inc.’s QCOM cellular modem chip with its own by the end of 2024 or early 2025, the report said. The move away from Qualcomm has long been in the works but has faced repeated delays.
Broadcom supplies Apple with a combined component that handles Wi-Fi and Bluetooth functions on its hardware products. Cupertino is now reportedly developing a chip to replace this component by 2025. Additionally, the tech giant is working on a chip, which combines cellular modem, Wi-Fi and Bluetooth capabilities into a single component, Bloomberg said.
Apple sources other components such as radio-frequency chips as well as chips that handle wireless charging from Broadcom. Bloomberg said The company, however, is working on customizing these components as well.
Why It’s Important: Broadcom has a relatively high revenue exposure of about 20% to Apple in the fiscal year 2022 that ended Oct. 30, 2022, according to the chipmaker’s 10-K filing for the year. In dollar terms, the revenue exposure would be $6.64 billion.
Qualcomm relied on Apple for 22% of its consolidated revenue or about $10 billion, Bloomberg said.
Apple’s quest to move things in-house could radically transform the chip industry, depriving it of billions of dollars of income, Bloomberg said. What started with diversification away from Intel has now grown and is impacting wireless electronics manufacturers as well, it added.
Price Action: Apple closed Monday’s session up 0.41%, at $130.15, according to Benzinga Pro data. Broadcom declined 1.94% before closing the regular trading session at $576.89 and was down 0.50% in after-hours trading.
After ending Monday’s session down 0.63% at $114.61, Qualcomm lost an incremental 0.44% in after-hours trading.
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