Broadcom secures record-scale $200 billion custom silicon and HBM supply agreement with Samsung for AI platforms
Broadcom and Samsung Electronics have announced a five-year agreement valued at over $200 billion, under which Broadcom will purchase various chips from Samsung. While this represents capital flowing out rather than in, the deal offers Broadcom significant strategic advantages in capitalizing on AI chip demand by locking down the supply of vital components.
The agreement comprises two primary components. First, Samsung and Broadcom plan to pursue a strategic collaboration for the supply of industry-leading memory solutions, including High Bandwidth Memory (HBM), to support Broadcom's next-generation AI accelerators. This is a necessary move as HBM is a critical—and currently scarce—component within AI accelerators. Broadcom expects its AI semiconductor revenue to grow by more than 200 percent year-over-year to $16 billion, with 10 gigawatts of data center commitments from large language model developers. The company may have a path to generate $200 billion in AI semiconductor revenue in 2027 or beyond. However, HBM is non-negotiable; without it, the vast majority of Broadcom's AI semiconductor opportunity could evaporate. The company must secure HBM supply, particularly given NVIDIA's massive HBM purchases.
A multi-year agreement with Samsung could also help Broadcom shield itself from HBM price volatility. Memory prices have seen dramatic upward swings, with HBM prices reportedly increasing by 20 percent in the first quarter alone. The deal could potentially cap future increases, helping to prevent margin contraction.
Broadcom is not alone in paying up for HBM supply. NVIDIA recently announced a similar partnership with SK hynix, entering a $500 billion deal that allows NVIDIA to secure a stable supply of next-generation AI memory. The deal also includes a two-gigawatt data center deployment, where SK Group, SK hynix's parent company, will use NVIDIA's Vera Rubin systems.
The second component of the Broadcom-Samsung deal surrounds Samsung's foundry operations. The collaboration focuses on Samsung's 2-nanometer and below process technologies for Broadcom's products, including Wireless Broadband Communications (WBC) solutions. The collaboration is expected to extend to advanced packaging technologies built on Samsung's 2-nanometer process, including 2.3D and 2.5D integration, to enable higher-performance and more power-efficient AI and networking silicon.
The WBC piece appears focused on Broadcom's wireless and smartphone chip business, likely supporting its $30 billion deal with Apple to supply wireless chips. However, the advanced packaging portion is AI-specific. Advanced packaging is critical to building advanced AI chips as it combines HBM with computing components. This agreement suggests Broadcom is considering Samsung's advanced packaging technology for its AI chips, though the release indicates the agreement is "expected to extend" into advanced packaging, suggesting nothing is yet set in stone.
This is notable given that Taiwan Semiconductor Manufacturing has dominated the advanced packaging market, and TSMC's capabilities are facing significant supply shortages. For Broadcom, exploring Samsung as an alternative advanced packaging supplier makes strategic sense. If Samsung's advanced packaging proves adequate for Broadcom's needs, the company may be able to sell more chips than it otherwise could.