Apple Plans in-house Components to Replace Qualcomm and Broadcom as Suppliers

    Apple Inc. has decided to use its in-house manufactured components and replace the chips from Broadcom Inc. in 2025, dealing a significant blow to its biggest supplier.

    Apple is also getting its first cellular modem chip ready by the end of this year or early 2025. Development snags have pushed the company’s deadline to replace the Qualcomm parts.

    Apple Inc. is Broadcom’s biggest customer and accounted for almost $ 7 billion or 20% of the chipmaker’s total revenue in the last financial year. Qualcomm Inc., on the other hand, got 22% of its sales last year from Apple. Though it earned $ 10 billion from sales to Apple, it had warned earlier that Apple’s share of the business would come down.

    The shares of Broadcom closed at $ 576.89, down 2% after the news came. Qualcomm shares slid to $114.61, down 0.6%. Shares of Apple Inc. rose to $130.15, up 0.4%.




    Chip Industries to Feel the Impact

    This move will further turn the chip industry upside down as they make billions of dollars while supplying components to Apple Inc. The most valued tech brand globally has already replaced intel chips from its Mac computers, and instead, it uses Apple Silicon, its in-house chips.

    Apple’s top product is the iPhone, which accounted for over half the $ 394.3 billion revenue in 2022. Broadcom Inc gained mainly due to supplying both wi-fi and Bluetooth components for apple devices.

    While making replacement chips, Apple is also working to combine Bluetooth and wi-fi capabilities in a single component. Broadcom Inc. is still supplying other components to Apple, including chips for wireless charging and radio frequency. iPhone, however, is working on customizing these parts as well.

    Broadcom CEO Hock Tan, however, expressed confidence that they il continue to supply parts to apple in a conference call last month. At the same time, Qualcomm declined to comment on this topic.

    Apple plans to shift from Qualcomm modems for its high-end iPhone models in 2023 and use its in-house modem because it expects around three years for the complete transition. The swap has been challenging so far, with problems with battery life and overheating affecting the cellular modem. The iPhone operates in 175 countries and works with more than 100 wireless carriers, which means testing processes are long and cumbersome.

    If Apple’s in-house modems are inferior to Qualcomm components, it will be a significant disadvantage to the company’s flagship product.

    The transition can place Apple in a tricky position as several of its components in various devices are replaced by Qualcomm, and it will need to rely on them for several years.

    Strained Relationships with Suppliers

    Apple was locked in a legal imbroglio with Qualcomm over patents and royalties related to modems until they settled in 2019. Apple realized Qualcomm was required for 5G support and agreed to procure parts till 2024 from them.

    With Broadcom, Apple had a strained relationship. Despite being the top customer, Broadcom wavered in its supply commitments and suggested it might divest its unit that supplies chips to Apple.



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