Apple AAPL is planning to put more of its homemade components in its devices as part of its efforts to reduce reliance on suppliers and technology partners like Broadcom AVGO, Qualcomm QCOM, Samsung and LG.
According to the latest report from Bloomberg, Apple is planning to use its custom displays in mobile devices as early as 2024 instead of those currently supplied by Samsung and LG. The company is expected to replace the display in its high-end Apple Watch with its in-house designed display by the end of next year.
The iPhone maker is also planning to ditch Broadcom by designing an important chip in-house in 2025. Apple is expected to have its homegrown cellular modem chips ready by the end of 2024 or early 2025, which will replace modem chips from Qualcomm in its devices.
Apple has moved away from using Intel INTC processors in its MacBooks by using its Apple Silicon. The latest development does not bode well for Broadcom and Qualcomm, as Apple is one of their major revenue contributors.
Apple’s In-house Plan to Give More Control on Supply Chain
Apple’s shares have declined 25.5% in the past year, underperforming the S&P 500’s fall of 19.1%.
Apple has suffered significantly from the pandemic-related supply-chain constraints and component shortages in the past year. Its holiday season iPhone shipments are expected to suffer from disruptions at its China partner Foxconn’s factory in Zhengzhou.
Apple’s plans to use more homegrown chips will enable it to gain control over its supply chain. It is also diversifying its production base as Apple is set to produce part of its MacBooks in Vietnam beginning as early as May 2023.
Vietnam, along with India, has evolved as the preferred production base for Apple devices. Vietnam already produces AirPods, some iPads and Apple Watch. Apple partner Foxconn has started manufacturing iPhone 14 in the Sriperumbudur facility near Chennai.
With some MacBook production moving out to Vietnam, Apple will have a second production base for all its devices, along with China. The company is expected to move some AirPods and Beats earphone production to India.
Nevertheless, a growing subscriber base in the Services business and a strong liquidity position are the key catalysts for Apple. The company has more than 900 million paid subscriptions across its devices.
Apple’s App Store continues to draw the attention of prominent developers from around the world, helping the company offer appealing new apps that drive App Store traffic. Since 2008, this Zacks Rank #3 (Hold) company has paid $320 billion to developers selling digital goods and services. Further, the growing number of AI-infused apps will attract more subscribers to Apple’s App Store. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.