Broadcom said on Thursday that it intends to continue investing in its radio frequency chip business, contradicting reports about the potential sale of the unit. The company said it altered its plans after landing long-term deals to sell wireless components and modules to Apple, giving it guaranteed slots in future generations of Apple's flagship smartphones, including 5G iPhones.
"After careful consideration we have come to the conclusion that continuing to invest in and operate our wireless assets will create the most value for our business and for our shareholders," Hock Tan, Broadcom's chief executive officer, said on a conference call with analysts on Thursday. "We are now more closely and strategically aligned with our largest smartphone customer as a result of our recent supply agreements," Tan added.
"We look forward to the continued success of our wireless franchises," he said.
Broadcom has been reportedly readying to sell its radio frequency business, one of the pillars of its wireless chip unit. Last year, the company warned that it would separate its wireless chip business—which rolls out Bluetooth, WiFi, GPS, RF and wireless charging components used in smartphones sold by Apple and others—from its core networking business, which sells processors used in network switches and routers in data centers.
Broadcom is one of the largest vendors of radio frequency filters used in smartphones to clarify transmissions on 2G, 3G, 4G, and 5G networks. Other chips it sells can be used to condition and amplify analog radio signals. Broadcom is fighting Qualcomm, Qorvo, and Skyworks Solutions, among others, to roll out more advanced RF filters that can separate out all the different frequency bands, including millimeter waves, used in 5G.
The San Diego, California-based company in January said it had hammered out a set of contracts to sell wireless components and modules to Apple into 2023. Broadcom said the deals supplement a prior agreement it worked out with Apple last year to sell radio frequency chips that serve as the scaffolding around the cellular modem in the iPhone. Apple is projected to pay $15 billion to Broadcom over the lifespan of the three deals.
The supply agreements buoyed the forecast for the radio frequency business, which has been slumping over the last year. The deals give Broadcom guarantees from Apple—one of the world's largest smartphone vendors—to continue buying RF chips for the years ahead. Broadcom elected not to sell the business once it established "a long-term road map and a strong market position with respect to high-end 5G smartphones," Tan said.
"It has less—or nothing to do, in fact—with what value we could get out of it," he said.