Broadcom forecasts upbeat Current-Quarter sales on 5G ramp up

Broadcom Inc forecast current-quarter revenue above Wall Street expectations, as the semiconductor firm is set to benefit from the rising adoption of 5G technology. As the global rollout of 5G ramps up, strong demand for higher-priced chips used in smartphones will benefit Broadcom. This counts iPhone maker Apple Inc as a major customer in its wireless chip division.

The company estimates third-quarter revenue to be about $6.75 billion. This is according to Refinitiv IBES data. This company also makes chips for data centers and servers. The company’s fiscal third-quarter estimates typically include ramping up production for the launch of Apple’s iPhones in the fall. After the results, the shares were flat. Chief Executive Hock Tan, on a conference call with investors said the demand in the company’s wireless segment was higher than expected in the just-ended fiscal second quarter. This could result in less demand in the fiscal third quarter.

The confidence to invest in R&D to make (capital expenditure) capacity investment, is given by the long-term supply contracts such as the one with Apple for Broadcom. And in return, they offer the best leading-edge technology in specific areas in a timely manner to their critical customers. Kinngai Chan, an analyst at Summit Insights Group said that while their industry checks do indicate significant double ordering in Broadcom’s supply chain, they think Broadcom’s customers are still unable to build much buffer inventory.

Broadcom has been working to allocate the chips it can get to end market demand for electronics rather than to customer stockpiling. Revenue rose to $6.61 billion in the second quarter ended May 2. $5.74 billion was there a year earlier. The company reported net income of $1.49 billion, or $3.30 per share, in the second quarter. On an adjusted basis, the company earned $6.62 per share, according to Refinitiv data.