JPMorgan says Meta will become Broadcom’s next billion-dollar customer

Facebook parent Meta Platforms Inc. will use custom chips from Broadcom Inc. to build its Metaverse hardware, which will be the chipmaker’s next billion-dollar ASIC customer, analysts at JPMorgan said Tuesday.

Analysts said ASIC (application-specific integrated circuit) chips will generate $2 billion to $2.5 billion in revenue for Broadcom this year, helped by its deals with Meta and partnerships with Alphabet and Microsoft.

“We believe these wins are primarily at 5 nanometers and 3 nanometers and will be used to power Meta’s Metaverse hardware architecture, which it will deploy over the next few years,” said analyst Harlan Sur.

Meta is investing heavily in the Metaverse — a virtual space where people interact, work and play — by adding new features to hardware devices that serve as access points to virtual worlds.

Sur said Google will be followed by Meta as Broadcom’s next $1 billion annual ASIC customer over the next three to four years.

ASICs are designed to efficiently perform highly specialized tasks, including AI and machine learning.

Broadcom and Google have co-developed Google’s custom chip used for machine learning tasks since 2016 and the brokerage estimates it will be worth more than $1.3 billion in 2022.

Meta is developing a range of hardware products for the Metaverse that includes smart glasses and virtual reality headsets, and has even opened its first physical store where shoppers can try out these devices and other gadgets.

“The near-term ASIC program pipeline is strong as we believe Broadcom will accelerate META/Facebook and Microsoft ASICs this year,” Sur said.

Broadcom’s Semiconductor Solutions business, which makes custom chips, contributed more than 70% of the company’s revenue of about $27.5 billion in 2021.

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