What's Up With Apple: Muscling In on Wireless Chips, Intel Fights Back, and More

Thursday was not a good day for tech stocks. As a whole, the sector dropped about 2.9%, leading to a decline in the Nasdaq Composite index of nearly 2.5%. One of the sector’s big losers was Apple Inc. (NASDAQ: AAPL), which retreated nearly 4%.

Other big tech players like Broadcom also dipped, and Apple was a big reason why. Bloomberg reported that Apple is hiring engineers in southern California to develop wireless chips to replace those the company currently sources from outside suppliers. Bloomberg’s Mark Gurman sums it up:

Apple’s interest in hiring talent related to a particular technology is usually bad news for the existing providers. The company has increasingly touted the importance of its in-house chip designs in making its products stand out.

Gurman wrote that Apple’s engineering team based in Irvine, California, would ” work on wireless radios, radio-frequency integrated circuits and a wireless system-on-a-chip, or SoC. They’ll also develop semiconductors for connecting to Bluetooth and Wi-Fi.” These are chips that Apple currently sources from Broadcom, Skyworks and Qualcomm.

Apple currently accounts for just over 25% of the revenue of Taiwan Semiconductor Manufacturing (TMSC). Intel’s contribution to TSMC’s top line is less than 1%, but that is about to change.

According to a report in Taiwan-based Digitimes, Intel CEO Pat Gelsinger is planning a visit to Taiwan to meet with TSMC officials to hammer out an agreement on extending the U.S. chipmaker’s cooperation with TSMC beyond 2023 and, perhaps, further. Intel already has struck a deal with TSMC to manufacture 3-nanometer (nm) chips. Production of the 3nm semiconductors is expected to begin in the second half of next year. Gelsinger has promised to win back Apple’s business, but to do so, he needs to elbow his way through a number of competitors for TSMC’s capacity.

TSMC is also working on bringing even more advanced 2nm chips to market by 2025. By that time, according to Digitimes, “Intel has the opportunity to become [one of TSMC’s] top three customers and become one of the main sources of profitable growth every year.” Given that TSMC’s second-largest customer (MediaTek) accounts for just 5.8% of the Taiwanese giant’s current revenue, that prediction could easily come true. No other company accounts for even 5% of TSMC’s revenue.

Briefly noted:

Apple has joined with a number of other companies to file an amicus brief supporting the federal Deferred Action for Childhood Arrivals (DACA) program that is currently being challenged in federal appeals court.

Premarket trading Friday morning had Apple stock down by another 1.5%. The company’s market cap shrunk to around $2.83 trillion after Thursday’s drop. That $3 trillion target now looks unlikely to be within reach before the end of this year.