A deal for Broadcom to develop custom ASIC ‘metaverse’ chips for Meta could be company’s second $1bn-a-year chip deal after Google, says JP Morgan
Facebook parent Meta is planning to use ASIC chips from Broadcom in its virtual reality hardware, according to JP Morgan, in what analysts described as a potential multibillion dollar-per-year relationship.
The company said it believes Meta is sourcing application-specific integrated circuit (ASIC) chips from Broadcom that will be used to drive hardware for interacting with virtual reality “metaverse” applications.
Meta is investing heavily in the future of virtual-reality social media to the point of changing its name from Facebook last year.
“We believe these wins are primarily at 5 nanometre and 3 nanometre and will be used to power Meta’s metaverse hardware architecture that it will deploy over the next few years,” said JP Morgan analyst Harlan Sur.
Google and Broadcom have co-developed a custom Google chip for machine learning (ML) tasks beginning in 2016 and JP Morgan estimated that deal will be worth more than $1.3bn this year.
Similarly, a deal to develop ASIC chips for Meta is likely to be worth more than $1bn over the next three to four years, the brokerage said.
This year ASIC chips will bring in $2bn to $2.5bn in revenue for Broadcom, JP Morgan estimated, driven largely by sales to Google parent Alphabet, Meta and Microsoft.
“Near-term ASIC program pipeline is strong as we believe Broadcom will be ramping Meta/Facebook and Microsoft ASICs this year,” Sur said.
Meta’s virtual reality (VR) or augmented reality (AR) hardware includes smart glasses developed with Ray Ban and Oculus-branded virtual reality headsets.
Earlier this month the company opened its first physical retail store, located on its own corporate campus in Burlingame, California, largely focused on giving hands-on demonstrations of its VR and AR hardware.
Last December major Meta institutional shareholder Arjuna Capital requested an advisory shareholder vote on the metaverse plans based on an assessment of the project’s “potential psychological and civil and human rights harms”.
“Shareholders worry (that) the metaverse will generate dystopian downsides and investment risk, given Facebook’s appalling track record addressing human and civil rights and privacy concerns affecting billions of people globally,” Arjuna Capital said in its proposal, which was rejected at Meta’s annual meeting last week.
Broadcom’s semiconductor solutions business, which makes the ASIC chips, contributed more than 70 percent of Broadcom’s nearly $27.5 billion (£22bn) in revenues last year.
The company is currently looking to diversify away from the semiconductor industry with a deal to acquire data centre infrastructure software maker VMware for $61bn.