Despite the pessimism surrounding the traditional personal computer market in recent years, Apple's (NASDAQ: AAPL ) Mac family of PCs has been growing nicely over the last several quarters. In fact, in the company's most recent quarter, Mac revenue grew 13% year over year and unit sales grew a whopping 18%. That made the Mac Apple's fastest-growing product category during the quarter.
While it's well-known that Intel is one of the key suppliers for the MacBook via its Core family of processors, another chipmaker also has some a healthy exposure to Apple's MacBook Pro.
Say hello to this chipmaker
Broadcom (NASDAQ: BRCM ) develops a wide variety of chips for a number of applications, including connectivity combo chips used in high-end mobile devices. It's not a surprise, then, that the company also supplies connectivity chips for Apple's MacBook Pro line of products.
In particular, according to iFixit, both the 13-inch and 15-inch variants of the latest MacBook Pro computers use Broadcom chips for Wi-Fi and Bluetooth. iFixit also reported the presence of a Broadcom chip known as the BCM15700A2, but this part is not listed on Broadcom's website (and a Web search turned up nothing), so it's not clear what this chip actually does.
Finally, iFixit reported that Apple uses a Broadcom touch controller in the touch pad of the 13-inch model, and it's very likely that the 15-inch model uses the same touch controller.
How much does Broadcom depend on Apple?
According to Broadcom's form 10-K filed in January, approximately 47% of the company's $8.31 billion in net revenue during 2013 came from its "mobile and wireless" segment. Additionally, Broadcom reported that 13.3% of its 2013 revenue came from Apple. Given that Apple probably isn't buying chips from Broadcom's other two businesses, it stands to reason that the tech giant represents about 28.3% of Broadcom's mobile and wireless business.
What does Broadcom's future with Apple look like?
For a long time, many expected that Broadcom would become a credible second source to Qualcomm (NASDAQ: QCOM ) as a cellular baseband vendor. However, Broadcom's recent exit from this market means this is no longer a possibility.
Keep in mind, too, that Broadcom estimates that approximately $500 million to $800 million of its annual connectivity chip business is "at risk" due to its divestiture from cellular. In particular, management has indicated that this "at-risk" business consists of chips that go into low-end and midrange smartphones, since vendors participating in these segments typically like to buy complete platforms from chip vendors.
Given that this low-end connectivity business could fade away, and with the loss of Broadcom's direct cellular baseband revenue, Apple's business as a percentage of Broadcom's overall revenue could rise over the next several years.
Bad news and good news
The bad news is that, in theory, Qualcomm, which has been aggressively pursuing its own connectivity chips, could put some serious pricing pressure on Broadcom in an effort to win the latter's sockets at Apple.
The good news for Broadcom, though, is that despite this increased competitive pressure, it still seems to be winning all key Apple designs (and I would, frankly, be shocked if the iPhone 6 didn't pack connectivity and touch controller chips from Broadcom).
While Broadcom's business isn't going to live or die based on MacBook Pro sales (the iPhone and iPad are much higher-volume sockets for Broadcom, though they may generate lower revenue per unit), it's interesting to see that the company supplies chips into more than just phones and tablets.
The company's overall exposure to Apple is fairly high, which means Broadcom must stay technologically ahead of its competitors in order to avoid significant margin compression. However, to date, Broadcom's track record in connectivity has been very good, and there's no reason to believe the company is going to fumble its position anytime soon.
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