Apple Inc. announced that it has signed a multi-billion dollar agreement with chipmaker Broadcom Inc. to employ American-made processors in its products.
As per the multi-year agreement, Fort Collins, Colorado, home to Broadcom's largest factory, would be used by Apple and Broadcom to design and manufacture 5G radio frequency components.
After the announcement, Broadcom's stock rose 2.2% and reached a record high. Since the iPhone maker accounted for nearly one fifth of the chipmaker's sales in its two most recent fiscal years, it is already a significant supplier of wireless components to Apple.
As part of its ongoing effort to diversify its supply chains, Apple has announced that it will purchase chips from a new Taiwan Semiconductor Manufacturing Co. facility being built in Arizona. The company is also developing more goods in Vietnam and India.
The scale of the transaction was kept a secret by the two parties, with Broadcom only stating that the new contracts call for it to give Apple "sufficient manufacturing capacity and other resources to make these products."
Previously, Broadcom and Apple had a $15 billion contract that was slated to expire in June, according to Bernstein analyst Stacy Rasgon. Despite the fact that the two companies did not provide a timeline for when the work will be completed, he said the development was favourable for Broadcom.
"It's good that it removes that overhang," Rasgon said. "Broadcom has existed over the years with a number of these long-term agreements with Apple. Sometimes they have them and sometimes they don't."
Apple said that it will use Broadcom to supply "film bulk acoustic resonator" (FBAR) chips. The FBAR chips are a component of a radio-frequency technology that facilitates mobile data network connectivity for iPhones and other Apple devices.
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