Apple signs multi-billion dollar deal with Broadcom for US-made chips

Apple Inc announced on Tuesday that it has reached a multibillion-dollar deal with chipmaker Broadcom Inc. to use chips made in the United States.

Under the multi-year agreement, Broadcom will develop 5G radio frequency components with Apple that will be designed and built at multiple U.S. facilities, including Fort Collins, Colorado, where Broadcom has a major factory, Apple said.

Broadcom rose 2.2% after the announcement, hitting a record high. The chipmaker is already a major supplier of wireless components to Apple, with about a fifth of its revenue coming from the iPhone maker in its last two fiscal years.

Apple has steadily diversified its supply chains, building more products in India and Vietnam and saying it will source chips from a new Taiwan Semiconductor Manufacturing Co plant being built in Arizona.

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The two companies didn’t disclose the size of the deal, with Broadcom saying only that the new agreements require it to allocate Apple “sufficient manufacturing capacity and other resources to manufacture these products.”

Broadcom and Apple previously agreed to a three-year, $15 billion deal that Bernstein analyst Stacy Rasgon said was due to expire in June. He said the development was positive for Broadcom, despite the two companies not giving a timeframe for how long the work would take.

“It’s nice 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 it would turn to Broadcom for so-called FBAR (Film Bulk Acoustic Resonator) chips. FBAR chips are part of a radio frequency system that helps iPhones and other Apple devices connect to mobile data networks.

“All of Apple’s products depend on technology designed and built here in the United States, and we will continue to deepen our investments in the American economy because we have unwavering faith in America’s future.” Apple CEO Tim Cook said in a statement.

Apple said it currently supports more than 1,100 jobs at Broadcom’s Fort Collins FBAR filter manufacturing facility.