Meta set to join Broadcom's $1 billion custom chip customer club - J.P. Morgan
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Broadcom's (NASDAQ:AVGO) custom chip wins are speeding up at Facebook parent Meta Platforms (NASDAQ:FB), J.P. Morgan says, predicting that Meta will emerge as Broadcom's next $1 billion-plus cloud ASIC customer.
Broadcom has dominated the market for ASIC chips - or application-specific integrated circuit, vs. more general ICs - for years, analyst Harlan Sur points out. And the company has many custom chip customers, including not only Meta but also Google, Microsoft, Tencent and TikTok parent ByteDance.
The chipmaker was instrumental in helping Google bring its TPU artificial intelligence chip to market, as well as ramping four TPU generations (and likely a fifth, at 5 nm, to come in the second half of 2022), Sur says.
Along the way, Broadcom's Google TPU ASIC program has grown from $50 million in 2017 to over $1.3 billion in revenues this year - a 90% compound annual growth rate.
As for Meta becoming the next big customer, "We believe Broadcom has secured several ASIC wins with Meta/Facebook at 7nm, 5nm, and 3nm for AI/ML processors, video transcode processors, and SmartNIC or DPU accelerator chips," Sur says, adding "We believe Broadcom is ramping video transcode ASICs into Meta/Facebook in the 2H of this year and AI/ML processors and DPU chips in the 2023/2024 time frame."
That sums up to cloud accelerated compute ASIC revenues driving $2 billion-$2.5 billion in revenues this year, mainly due to Google, Meta and Microsoft. Broadcom and Marvell are expected to be the primary beneficiaries of an $11 billion-$12 billion high-end ASIC market growing at a compound annual rate of 12-15%, Sur says.
Reacting to earnings, Seeking Alpha contributor Stephen Simpson says the company will keep benefiting from leadership in networking/data centers and that a $61 billion acquisition of VMware is consistent with strategy.