Apple to Replace Key Broadcom Chip in 2025 for Homegrown Components

Apple is pushing to replace the purchased chips from Broadcom Inc. with in-house designs in 2025, a potential big loss to the company as the Cupertino giant is currently their largest customer with 20% of its revenue in the last fiscal year.

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CHICAGO, ILLINOIS - NOVEMBER 28: The Apple company logo hangs above an Apple retail store on November 28, 2022 in Chicago, Illinois. Apple is currently facing shortages in iPhone supplies due to COVID-19 restrictions in China and unrest at one of Apple's major Chinese suppliers.

Replacing Chip with Homegrown Design

Apple plans to replace its major supplier for chips, Broadcom. Inc, as they make their own components to reduce their reliance with other chipmakers. According to Reuters' report, chips will be replaced by in-house designs by 2025.

Broadcom's WiFi and Bluetooth chips for Apple devices are among the components that are planned to be replaced by the company. Aside from the two, cellular chips are also included in the plans, and the company aims to replace them by the end of 2024 or early 2025.

Qualcomm stated that Apple has been phasing out its chips and developing a replacement for it for several years already. Apple Insider reported that the company also works on a follow-up version that aggregates WiFi, Bluetooth, and cellular capabilities into a single design.

Apple is currently using the X65 modem of Qualcomm for its 5G modem in its iPhone 14 series. Jefferies Analyst William Yang stated that this might not be the case for the iPhone 15 models as the company plans to deploy a newer version of the same chip.

While the mentioned components are being replaced, chips for radio-frequency and wireless charging will still be provided by Broadcom through the mentioned years. However, Apple still plans to replace those with in-house components in the future.

Broadcom's State

Apple is Broadcom's largest customer, as they accounted for 20% of its revenue last fiscal year. This amounts to almost $7 billion. Meanwhile, Qualcomm got 22% of its annual sales of the company, which amounts to almost $10 billion.

While Apple already warned their suppliers that they plan to reduce their reliance on their chipmakers, AB Bernstein Financial Analyst Stacy Rasgon this will still hit Broadcom's revenue by about $1 billion to $1.5 billion.

As per Bloomberg's report, shares of Broadcom fell by almost 4.7% before paring the company's decline. This closed at $576.89, with shares ending 2% lower. Before closing at $114.61 with as much as 1.6%, Apple increased 0.4% to $130.15.

Chief Executive Officer Hock Tan stated during a conference call in December that they will still be continuing to work with Apple for other aspects. He added, "We believe we have the best technology and delivering value to our customers. There's no reason to find something else where you're not the best."

As Apple aimed to launch its own cellular modem this year, the company faced several problems with iPhones, such as overheating, battery life, and validating the component.