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Accordingly, Google is mulling transitioning to an in-house design by as early as 2027. This decision was influenced by pricing disputes between Google and Broadcom regarding TPUs.
Wells Fargo analysts commented that AVGO losing Google “would be a multi-billion dollar annual impact”.
“The company’s Custom Silicon business which includes the TPU, YouTube video encoding chips, Meta’s MTIA, and more has been one of the fastest-growing segments of Broadcom’s business which represents several billion dollars a year in revenue; Google TPUs making up the majority,” analysts wrote in a note.
On the other hand, BofA analysts believe this article could be a part of the campaign to lower prices and a contract negotiation tactic, rather than something investors should be worried about.
“Developing internal chips completely internally by systems/cloud customers is easy to say, but often really hard to do in its practice as Apple recently discovered when it unsuccessfully tried to replace Qualcomm’s 5G modem,” analysts noted.
“The choice is either to Buy off the shelf (merchant silicon) from NVDA or others and/or or engage in multiyear custom internal designs (ASIC) in partnerships with the likes of AVGO, MRVL and their Taiwanese peers. Either way, there is no low-cost short cut given the significant design IP and manufacturing scale/expertise that mainstream chip companies bring to the table.”
