Key Points
Shares of Broadcom (NASDAQ: AVGO) climbed on Wednesday after the chipmaker struck a lucrative supply deal with Apple (NASDAQ: AAPL).
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Joining forces to bolster U.S. chip production
The two companies will work together to develop “custom silicon components and cutting-edge wireless connectivity technologies for a wide range of Apple products,” Apple announced on Wednesday.
The multiyear deal is valued at over $30 billion and is expected to produce more than 15 billion U.S.-made chips.
Apple has promised to invest $600 billion in the U.S. by the end of the decade as it strives to build an “end-to-end silicon supply chain in America.” As part of the collaboration, Broadcom will expand its manufacturing plants in Fort Collins, Colorado.
“Apple and Broadcom have a long history together, and this new phase of our partnership further accelerates our commitment to American manufacturing and innovation,” Apple CEO Tim Cook said.
This deal is a win-win-win
The chip production agreement with Broadcom will help Apple diversify its supply chain and reduce its reliance on potential geopolitical hotspots like Taiwan. That’s good for both companies, their customers, and their shareholders.
The investments in U.S.-based production could also help Apple and Broadcom gain favor with the Trump administration, which has prioritized domestic manufacturing.
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Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple and Broadcom. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
