Broadcom allegedly citing supply chain issues to lock customers in exclusively

Chipmaker Broadcom is reportedly back under investigation with the US Federal Trade Commission (FTC) regarding complaints it is illegally forcing exclusivity agreements with customers.

According to The Intercept, Broadcom is justifying the actions by claiming they are necessary thanks to supply-chain issues. The FTC is allegedly in the early days of gathering information, doing so by taking testimony and collating documents.

The report comes less than 6 months after the FTC issued an order [PDF, since deleted from the FTC's website] to curb anticompetitive behavior from the company, including exclusivity agreements or retaliation against customers who shop around for their chips.

The November 2021 order specified Broadcom was prohibited from this behavior in regards to key chips for traditional broadcast set-top boxes and DSL and fiber broadband internet devices.

When the FTC issued the complaint that led to the order in July 2021, it referred to Broadcom as a "monopolist," as well as "one of the few significant suppliers of five related types of chips." The five chips included the three aforementioned core circuitry chips, as well as WiFi and front-end models.

Broadcom's customers include Apple, HP, Motorola, IBM, Dell, Asus, Lenovo, Linksys, Cisco and more, and its core circuitry OEM customers include AT&T, Charter, Comcast, DISH and Verizon. 

Some financial analysts have recently sprinkled extra doom and gloom on what feels like a never-ending chip crisis by announcing that semiconductor lead times grew to an average of 26.6 weeks in March. This means it now takes chipmakers on average over half a year to deliver the parts.

In 2021, Broadcom's order backlog grew to almost $15 billion, up 15 percent from 2020, it said on an analysts' call in December 2021 in which it discussed results for the year.

Meanwhile, during the company’s Q1 2022 results call in March, CEO Hock Tan said Broadcom was booking orders at least through to the first half of 2023.

"It's the latter part of '23 and '24 that we have to figure out whether there is enough supply that will start coming in to basically address what is today and what we're seeing," said Hock. "An extremely strong demand environment, whether it's from enterprise, telcos and service providers and hyperscale – all three are strong." ®