Tech giant Apple (NASDAQ:AAPL) might ditch two of its key suppliers, Broadcom (NASDAQ:AVGO) and Qualcomm (NASDAQ:QCOM), for in-house components, Bloomberg reported. It is developing a chip combining WiFi and Bluetooth technology to replace components sourced from Broadcom in 2025. Apple also intends to displace Qualcomm’s cellular modem chips with its own by 2024-end or early 2025.
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Additionally, Apple is working on other components that it sources from Broadcom, including radio-frequency chips. As per Broadcom’s annual report, Apple is its largest customer and accounted for nearly 20% of its Fiscal 2022 sales. Meanwhile, Qualcomm generated 22% of its prior fiscal year’s sales from Apple, based on Bloomberg’s estimates. Nonetheless, Qualcomm has been warning its shareholders that Apple will phase out its chips.
In its annual report, Qualcomm pointed out that Apple acquired Intel’s (NASDAQ:INTC) modem assets in 2019 and is developing its own modem products using the acquired assets. Qualcomm added, “Accordingly, we expect Apple to use its own modem products, rather than our products, in some or all of its future devices.” Furthermore, in its Q4 FY22 earnings call held in November 2022, the company stated that it is expecting “minimal contribution from Apple product revenues in fiscal ’25.”
In late 2020, Apple started transitioning from Intel’s processors to Apple Silicon in-house chips in Mac computers. The company’s strategy to develop its own chips will help it limit its reliance on other chipmakers and address supply chain concerns to some extent. Apple is also working on diversifying geographically. The COVID-led disruptions in China and the worker unrest at key iPhone supplier Foxconn have reinforced the need for Apple to diversify beyond China and limit third-party dependence.
Is Apple a Buy, Sell, or Hold?
Despite macro pressures and supply chain woes, Wall Street has a Strong Buy consensus rating for Apple based on 22 Buys and five Holds. The average Apple stock price target of $174.71 implies 34.2% upside potential. Shares have declined over 24% in the past 52 weeks.
