Broadcom Shares Gain After $15 Billion Apple Component Deal

Broadcom told the SEC Thursday that its reached two component deals with Apple that could net it $15 billion in revenue of the next three-and-a-half years.

Broadcom Inc.  (AVGO) - Get Report shares traded higher Friday after the wireless chip maker reached two product deals with Apple  (AAPL) - Get Report that could generate $15 billion in sales. 

Broadcom said in a late Thursday filing with the U.S. Securities and Exchange Commission that the three-year deals, which it called '2020 SOWs', would center around "the supply of a range of specified high-performance wireless components and modules to Apple for use in its products." The filing suggests total revenues from the two agreements could generate $4.3 billion per year, or $15 billion over the life of the contracts..

"The 2020 SOWs are in addition to the agreement between the Company and Apple entered into on June 9, 2019, which remains in effect with respect to the supply of specified RF components and modules to Apple," the filing said. "The 2020 SOWs, and the remaining portion of the 2019 SOW, apply to Apple products launched during the three and a half year period beginning in January 2020."

Broadcom shares were marked 2.2% higher in early trading Friday to change hands at $327.21 each, a move that would nudge the stock's six-month gain to around 7.9%, Apple shares, meanwhile, were marked 0.34% higher at $320.30 each.

Apple's iPhone 11 models, as well as the iPhone XS and XR, use Broadcom components such as an RF power amplifier module and a Wi-Fi/Bluetooth combo chip.

TheStreet's Eric Jhonsa noted last year that Apple's 2020 handset plans, which reportedly include 5.4 inch and 6.7 inch iPhones, citing a study from closely-watched analyst Ming-Chi Kuo

"The report also indicates that Broadcom -- whose wireless chip sales have been recently pressured by the Huawei parts ban, smartphone sales declines and (quite possibly temporary) 4G RF share loss to Qorvo  (QRVO) - Get Report within 2018 iPhones -- will see its RF chip sales to Apple jump in 2020," Jhonsa noted.

"In addition, Kuo's report drives home the large opportunity that 5G presents for RF chip suppliers in general (and) markets might not fully appreciate how this opportunity can help the companies grow their mobile chip sales in the coming years, even if smartphone unit sales remain sluggish," he added..