Apple signs a multi-billion dollar deal with Broadcom to buy US-made chips

(Reuters) – Apple Inc (AAPL.O) said on Tuesday it has struck a multibillion-dollar deal with chipmaker Broadcom Inc (AVGO.O) to use chips made in the United States.

Under the multiyear agreement, Broadcom will develop 5G radio frequency components with Apple that will be designed and built at several US facilities, including Fort Collins, Colorado, where Broadcom has a major factory, Apple said.

Broadcom stock rose 2.2% after the announcement, setting a record. 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 is steadily diversifying its supply chains, building more products in India and Vietnam, and saying it will source chips from a new Taiwan Semiconductor Manufacturing Co. (2330.TW) factory under construction in Arizona.

The two companies did not disclose the size of the deal, and Broadcom only said that the new agreements require it to allocate to Apple “sufficient manufacturing capacity and other resources to make these products.”

Broadcom and Apple each had a three-year, $15 billion agreement that Stacy Rasgon, an analyst at Bernstein, said is set to expire in June. He said the development has been positive for Broadcom, despite the fact that the two companies haven’t given a time frame for how long the business will continue.

“It’s a good thing he can take that load off,” Rasgon said. “Broadcom has been around 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 will use Broadcom to acquire what are known as acoustic resonator (FBAR) chips. FBAR chips are part of a radio frequency system that helps iPhones and other Apple devices connect to mobile data networks.

“All Apple products are based on technology that is designed and built right here in the United States, and we will continue to deepen our investments in the American economy because we have an unwavering belief 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.

Reporting by Stephen Nelis. Editing by Chizu Nomiyama

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