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Meta to Join Broadcom's High-Profile Customer List

Industry: Internet Services; Social Media
Current: Other Industry Indicators

Meta Platforms Inc, the parent company of Facebook, plans to use Broadcom Inc's bespoke chips to develop metaverse technology, becoming Broadcom's next high-value customer.
With arrangements with Google and Microsoft already in place, the Meta deal is projected to increase Broadcom's revenue in 2022.
According to GlobalData, the global semiconductor industry is expected to grow 8% YoY in 2022 to $541 million.

Meta is making huge investments in ‘metaverse’, a virtual area where people communicate, work, and play, by adding new capabilities to hardware devices that serve as virtual world access points. The social network company is working on a number of metaverse hardware devices, including smart glasses and virtual reality headsets. The company has even opened its first physical store where customers could try out these gadgets. Broadcom Inc's ASIC chips will support the hardware integration for the expansion of 'metaverse'.

What are ASIC Chips?

ASIC (Application-Specific Integrated Circuit) is a custom-designed microchip board that performs a specific operation or addresses a specific need. ASICs could be constructed to efficiently perform hyper-specific tasks such as artificial intelligence (AI) and machine learning (ML).

What is in it for Meta?

ASICs could be cost-effective for the metaverse program, which requires massive production runs, despite the initial design cost being exorbitant. Meta would benefit from this upgrade in a variety of ways, including avoiding supply chain challenges, reducing overall hardware size, increasing energy efficiency, and performing specialized functions. This upgrade to ASIC devices would result in fewer electronic components and be easier and cheaper to assemble by combining several functions in a single chip.

Broadcom’s High-Profile Clientele

Broadcom's semiconductor solutions business, which develops bespoke chips, contributed more than 70% of the company's $27.5 billion sales in 2021, according to the company's 2021 Annual Report. Google and Microsoft, in addition to Meta, have already employed Broadcom's specialized processors for machine learning. In light of the global scarcity of semiconductors, the addition of Meta to Broadcom's client list should be a huge success for the company, whose stock dropped 12% since the beginning of the year, compared to the 23% drop for the PHLX Semiconductor Index (SOX).

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