Consumer electronics giant Apple on Tuesday announced a multiyear, multibillion-dollar agreement with Broadcom for the chipmaker to supply 5G wireless components. Apple stock fell and AVGO stock rose on Tuesday.
In a news release, Apple said it is collaborating with Broadcom to develop 5G radio-frequency components — including FBAR filters — and "cutting-edge wireless connectivity components." Film Bulk Acoustic Resonator, or FBAR, filters are used to partition frequency bands to capture stronger and more reliable signals.
The companies plan to design and build the FBAR filters in several U.S. manufacturing and technology hubs. That includes Broadcom's manufacturing facility in Fort Collins, Colo.
"We're thrilled to make commitments that harness the ingenuity, creativity, and innovative spirit of American manufacturing," Apple Chief Executive Tim Cook said in a written statement. "All of Apple's products depend on technology engineered and built here in the United States, and we'll continue to deepen our investments in the U.S. economy because we have an unshakable belief in America's future."
Apple Stock, AVGO Stock Diverge
On the stock market today, Apple stock dropped 1.5% to close at 171.56. However, AVGO stock climbed 1.2% to finish at 686.50.
The Apple news release about the Broadcom deal was short on details. It did not state which Apple devices would use the components. Those devices presumably would include the iPhone and iPad, but perhaps Apple's rumored mixed-reality headset. Analysts expect Apple to announce the headset on June 5.
The wireless components that Broadcom currently makes for Apple are different from the 5G modems supplied by Qualcomm. However, Apple hopes to eventually replace Qualcomm with its own modem.
Apple did not respond to a request for comment. Also, Broadcom would not provide further details about the agreement. "This is a multiyear collaboration to develop cutting-edge wireless connectivity and 5G components," a Broadcom spokesperson said in an email.
Apple, Broadcom On IBD Tech Leaders List
The Apple deal with Broadcom is part of the commitment Apple made in 2021 to invest $430 billion in the U.S. economy over five years. Apple said it is on pace to meet that target through direct spending with U.S. suppliers, data center investments and other capital expenditures.
The deal follows a similar long-term agreement expiring this year, KeyBanc Capital Markets analyst John Vinh said in a note to clients. The agreement is a positive for Broadcom because it addresses concerns about the sustainability of the company's business with Apple, he said.
Apple stock and Broadcom stock are on the IBD Tech Leaders list. Broadcom also is on the IBD Big Cap 20 stock list.
Apple stock has an IBD Composite Rating of 91 out of 99, according to IBD Stock Checkup. Meanwhile, Broadcom has a Composite Rating of 98.
IBD's Composite Rating combines five separate proprietary ratings into one easy-to-use rating. The best growth stocks have a Composite Rating of 90 or better.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
