Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Is Broadcom Getting Shut Out of Future iPhones?

For years, mobile connectivity specialist Broadcom (UNKNOWN: BRCM.DL  ) has enjoyed a cushy spot in Apple's (NASDAQ: AAPL  ) iPhones, proving the Wi-Fi and Bluetooth combo chip that serves up short-range communications signals. Broadcom investors are getting rattled today, with shares dropping as much as 7%, on the possibility that the company may get shut out of future iPhone design wins. This all comes as Broadcom prepares to report earnings after the bell today.

The culprit was an interesting disclosure from Texas Instruments (NASDAQ: TXN  ) last night, which publicly exited the mobile and wireless sector last year.

TI no longer sells its OMAP processors for mobile design wins, and got out of basebands years before that. Instead, TI is focused on embedded markets. The wireless segment continues to decline, on track with the company's planned exit.

To that end, Texas Instruments has been getting rid of various parts of its wireless business. That included laying off 1,700 employees worldwide in November. Apple had been reportedly snapping up these wireless engineers at the time, hiring dozens of chip engineers -- many of whom worked on Wi-Fi and Bluetooth radio chips. TI was winding down its presence in Israel just as Apple was growing its own research center in the region.

Last night, TI said its results included a $315 million gain related to "a transfer of wireless connectivity technology to a customer." That transfer helped bolster TI's operating profit, which totaled $906 million. The underlying fear is that Apple is the customer in question, and that the Mac maker is preparing to bring connectivity chip development internal. That's a big risk to Broadcom's enviable spot as the exclusive supplier of Wi-Fi combo chips.

It may not happen immediately, but Apple has begun to internalize key parts of component design, starting with the A-chip processors. That's why it's quite feasible that the Mac maker is exploring ways to bring other chip designs in-house. This also presents a risk to other Apple suppliers, including Qualcomm (NASDAQ: QCOM  ) in an extreme case further down the road.

At a time when smartphone OEMs are transitioning toward integrated baseband solutions en masse, Apple remains the biggest buyer in the discrete baseband market. Qualcomm enjoys an exclusive lock on Apple's baseband business, but it seems inevitable that Apple will want to integrate cellular connectivity eventually. That's much more challenging than short-range connectivity, so the risk facing Qualcomm may be farther off.

The risks that Broadcom faces are on the horizon.

It's incredible to think just how much of our digital and technological lives are almost entirely shaped by just a handful of companies -- and Apple leads the pack. Find out "Who Will Win the War Between the 5 Biggest Tech Stocks?" in The Motley Fool's latest free report, which details the knock-down, drag-out battle being waged by the five kings of tech. Click here to keep reading.

Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2551712, ~/Articles/ArticleHandler.aspx, 10/1/2016 8:42:45 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 11 hours ago Sponsored by:
DOW 18,308.15 164.70 0.91%
S&P 500 2,168.27 17.14 0.80%
NASD 5,312.00 42.85 0.81%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

12/31/1969 7:00 PM
BRCM.DL $0.00 Down +0.00 +0.00%
Broadcom CAPS Rating: ****
AAPL $113.05 Up +0.87 +0.78%
Apple CAPS Rating: ****
QCOM $68.50 Up +1.05 +1.56%
Qualcomm CAPS Rating: ****
TXN $70.18 Up +0.34 +0.49%
Texas Instruments CAPS Rating: ***