Piper Sandler sees no strategic reason for Apple to insource Wi-Fi combo chip

Piper Sandler analyst Harsh Kumar notes that Broadcom (AVGO) is down after a Bloomberg report said Apple (AAPL) will begin to make its own version of Broadcom’s Wi-Fi combo chip by 2025. The analyst things this is inconsistent with Apple’s strategy of only focusing on strategic chips for internal manufacturing, for example compute. In his opinion, the only reason for insourcing Qualcomm’s (QCOM) modem is Apple’s objection to royalty payments to Qualcomm. Further, Kumar sees nothing strategic to Apple in developing a Wi-Fi + Bluetooth combo chip. While important, he believes it is also very capably produced by Broadcom and Apple is able to procure it with reasonable economics. The analyst has an Overweight rating on Broadcom’s shares with a price target of $715.