Last week, the Wall Street Journal reported Broadcom is interested in selling off its radiofrequency (RF) segment. Indeed, the corporation wants to divest its non-essential businesses to focus on developing its software unit. Now, JPMorgan has stated Apple will likely make a play for the San Jose, California-based company’s RF component division.
The Journal believes Broadcom’s RF segment could fetch up to $10 billion.
Why Broadcom is Selling off its RF Segment
Since its founding in 1961, Broadcom has made its bread-and-butter by selling chips to various computer companies. Today, the corporation is a major supplier of semiconductors to Apple and South Korean conglomerate Samsung. However, the firm is currently in the process of diversifying its offerings.
Earlier this month, the chipmaker reclassified its wireless component holdings as “noncore” to its semiconductor business. Notably, Broadcom’s RF division generated $2.2 billion in revenue in the 2019 fiscal year. Moreover, market analyst firm Raymond James called its film bulk acoustic resonators (FBARs) “best in class.”
Still, Broadcom is no longer leading the way in terms of RF chip innovation. Investor’s Business Daily noted the corporation hadn’t spent enough money on its wireless division to keep pace with the industry. Accordingly, rival chipmaker Qorvo developed new filters that perform the same functions as its competitor’s FBARs despite being smaller in size.
Instead of trying to fight its rivals, Broadcom seems interested in divesting itself of its wireless business. Subsequently, the corporation reportedly plans to dedicate more resources to maturing its more lucrative software business.
Why Apple Might Buy Broadcom’s Wireless Business
There are several reasons why various market analysts believe Apple will buy Broadcom’s wireless assets.
For one thing, the iPhone maker currently represents 25 percent of the chip manufacturer’s business. As such, it makes sense that Broadcom would offer its RF segment up to a buyer with a pre-existing need. Creative Strategies analyst Ben Barajarin tweeted that Apple has been looking to set up a radiofrequency chip unit.
JP Morgan notes MediaTek, Murata, and Skyworks may also bid on Broadcom’s RF business. Nevertheless, the organization believes Apple would be the most likely buyer.
The Cupertino, California-based tech firm has recently taken steps to move more of its device component development in-house. In July, Apple purchased Intel’s wireless assets for $1 billion. Consequently, the firm acquired a host of intellectual property, equipment, and 2,000 skilled workers.
When the transaction was announced, Apple said it made the purchase to expedite its future hardware development. However, a decade ago, CEO Tim Cook explained he wanted to bring the core technologies his company uses for its electronics in-house. Given the struggles the firm has had with its component suppliers in recent years, Cook’s policy makes a lot of sense.
Right now, the only impediment to a possible deal between Broadcom and Apple is pricing. As previously noted, the chipmaker might set a $10 billion asking price for its RF chip unit. To date, the iPhone maker’s largest purchase is its $3 billion acquisition of Beats Electronics in 2014.