Apple announced on the 23rd (local time) that it has signed a supply contract with Broadcom, a US communication chip design company, in the amount of trillions. Earlier this year, it was predicted that the company would end its relationship with Broadcom, whose contract expires in June, and design its own communication chip, but it decided to continue working with Broadcom. It is interpreted that Apple is trying to diversify its supply chain amid difficulties in developing its own communication chips and at the same time increase the proportion of American semiconductors.
Under this contract, Broadcom will develop and supply chips for 5G communication to Apple, including the FBAR filter, a component that separates transmission and reception signals from wireless communication devices such as iPhones. Apple explained the extension of the supply contract with Broadcom as an increase in investment in the United States, and said, “We will make state-of-the-art 5G communication chips at design and production facilities in the United States, including Fort Collins, Colorado.”
This supply contract is part of an investment agreement in which Apple announced in 2021 that “it will invest 430 billion dollars (567.4 trillion won) in US suppliers and manufacturers over five years.” The duration and amount of the supply contract with Broadcom were not disclosed, but the market predicts more than 15 billion dollars (19.8 trillion won) by 2026. Since Apple’s share of Broadcom’s sales is around 20%, Broadcom’s share price rose to 2.5% during the day on the New York Stock Exchange, approaching its all-time high.
“We are very pleased to make this commitment to harness the ingenuity, creativity and innovative spirit of American manufacturing,” said Tim Cook, Apple’s CEO. “All of Apple’s products rely on American technology. We will continue to strengthen our investments in the American economy because we have strong faith in the future of the United States.”
Apple’s conclusion of a supply contract with Broadcom is interpreted as an attempt to diversify its supply chain away from its dependence on Qualcomm. Some see it as a sign that Apple is having difficulties developing its own communication chip. Apple has already replaced Intel chips with its own chips in computer products, but it has been struggling with communication chip development.
There is also an interpretation that Apple will further increase US production by utilizing TSMC’s Arizona plant, which will start operating from 2024, as Apple puts an emphasis on the message of ‘strengthening investment in the United States’. Apple is trying to get out of its supply chain in China, starting iPhone production in India. In addition, there is an analysis that Apple, which was extremely reluctant to disclose its partners, was under pressure from the US political circle for the background of emphasizing the ‘origin’ of parts, such as attending the groundbreaking ceremony of TSMC last year. The Financial Times (FT) reported that “Apple has been under investigation (by the US government) for its high dependence on Chinese manufacturers amid deteriorating US-China relations.”
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Source: Donga
Mark Jones is a world traveler and journalist for News Rebeat. With a curious mind and a love of adventure, Mark brings a unique perspective to the latest global events and provides in-depth and thought-provoking coverage of the world at large.