Dive Brief:
- Apple has entered into a multiyear agreement with longtime chip supplier Broadcom to develop a range of custom silicon for use across multiple generations of the computer maker's products, according to a July 8 press release.
- The deal is expected to exceed $30 billion and lead to the production of more than 15 billion U.S.-made chips, including wireless connectivity technologies for a wide range of Apple products, according to the release.
- To fulfill the agreement, Broadcom plans to expand and modernize its Fort Collins, Colorado, manufacturing facilities with a $1.5 billion capital expenditure investment, per the release. The chipmaker plans to produce advanced radio frequency components and wireless connectivity technologies at the facility.
Dive Insight:
Industry supply-and-demand imbalances have led to supply constraints and rising component costs for Apple, according to the company’s quarterly securities filing. Supply shortages have included advanced semiconductors and memory chips.
Broadcom will also develop and supply Apple with custom application-specific integrated circuits, or ASICs, as part of the deal that extends to 2031, according to a July 6 securities filing. The purpose of the chips was not disclosed. However, Apple uses tensor processing units — a type of ASIC — to train the foundation models for its AI system called Apple Intelligence.
Broadcom makes ASICs for artificial intelligence and high-performance computing, according to the company's annual securities filing.
Broadcom chips will be less expensive than Apple designing the ASICs in-house, Jack Gold, founder and principal analyst of J.Gold Associates, told Supply Chain Dive.
"The market is moving so fast that if you're a generation or two generations behind, you're not competitive," Gold said, noting also that Broadcom, which designs many more semiconductors than Apple, would get priority with chip manufacturers.
Apple expects the supply constraints to intensify, which could "materially adversely affect demand for the Company’s products and negatively impact the Company’s revenue, costs, gross margin, results of operations and financial condition," per the quarterly filing.
AI infrastructure buildouts in enterprises and data centers have continued to drain the global chip supply. In response, manufacturers are shifting production toward high-bandwidth memory, reducing output of conventional memory, per the Global Electronics Association's 2026 memory market report.
In June, Apple raised MacBook prices amid the ongoing chip shortage. Dell has also raised prices due to mounting memory inflation. Computer makers HP Inc. and Hewlett Packard Enterprises have also grappled with the issue, leveraging supplier relationships and long-term agreements to counter memory shortages.
