TheChek News Flow

The chipmaker has gone from a sleepy business to a trillion-dollar company through megadeals and deeply unsentimental management.

Early last year, Broadcom CEO Hock Tan decided to host what he likes to call a “coffee chat” with the employees of VMware, the software giant that the Broadcom CEO had recently purchased for $84 billion. The companywide meeting was Tan’s effort to introduce himself and answer questions from those employees about life at the semiconductor firm.

At that time, VMware’s Palo Alto, Calif., campus sprawled over 18 buildings and 100 acres of delicately pruned gardens, an outdoor amphitheater and a turtle pond. Employees enjoyed nice HR perks, too, including child care, marital counseling and an annual $1,000 “wellbeing” allowance for anything from dumbbells to Xboxes.

When Tan opened the discussion up to questions, a VMware employee asked if Broadcom provided such benefits. Tan seemed surprised. “Why would I do any of that? I’m not your dad,” he replied, according to three people in attendance.

Over the next few months, Tan fired about half of VMware’s 38,000 employees. He also stripped down the campus, selling all but five of the buildings. At the remaining offices, Tan had the espresso machines removed. Somewhat against the odds, the turtles were allowed to stay.

Tan has gotten quite far on his no-frills, no-nonsense attitude, which has helped Broadcom’s stock rise nearly sevenfold in the last three years and has made him into a much-admired figure among other tech executives. He’s done what so many founders and CEOs wish they could: totally ignore the industry’s fondness for capitalistic paternalism—and remain strictly focused on keeping Broadcom’s profits fat, its prices high and its costs minimal. That is the picture of Tan painted by more than two dozen people who know Tan well and understand what he’s built at Broadcom, a collection of friends, business partners and current and former Broadcom executives. Tan did not comment for this story.

Silver Lake Chair Ken Hao, a Broadcom director who has known Tan for two decades, thinks Tan’s remarkable run lies in a “focus on first principles that don’t come from conventional wisdom,” he said. “Or copying other people.”

Lately, the company’s place within the unfolding AI age has broadly lifted both Tan and Broadcom. One of its main businesses is making custom computer chips, known as application-specific integrated circuits, or ASICs, that are built to perform a single task more efficiently and cheaply than chips made by Nvidia. That makes Broadcom one of the only credible challengers to Nvidia’s dominance in the chip market. Google is Broadcom’s best-known and oldest customer, and Broadcom has scored a number of new megadeals in the past three years, including ones with OpenAI and Meta Platforms. (Tan was appointed to Meta’s board of directors last February.)

And now Microsoft is also in talks to design future chips with Broadcom, which would involve Microsoft switching its business from Marvell, another maker of custom chips, according to one person involved in the discussions.

About 60% of Broadcom’s revenue comes from making these chips, along with the switches and subsystems needed for them to work. The other portion of its sales come from infrastructure software. Tan, an inveterate M&A junkie, has steadily increased that part of the company through acquisitions over the past eight years, buying up VMWare, cybersecurity company Symantec, and Computer Associates, a maker of IT software, among others.

Together, Broadcom did over $50 billion in sales last year, up more than 50% in two years. It’s on track to top $60 billion this year, with the hard-nosed, unsentimental Tan guiding it to become one of just 11 trillion-dollar companies in the world.

Broadcom may be on a rarified perch, but plenty of factors could knock it down from there. AI spending has reached extraordinary levels, but each week lately has brought fresh concerns that the party simply can’t continue. Any broad downturn would hurt Broadcom’s chip business.

Meanwhile, Broadcom has a growing number of fierce rivals for custom chips—most prominently Marvell—and as AI demand increases the hunger for chips, some of its customers are keen to explore any possible opportunity to bypass Broadcom in search of cheaper alternatives.

For instance, Marvell recently tried to win more business from Meta Platforms by waiving part of an up-front engineering fee Marvell generally charges for designing chips, according to two people involved in the talks. Meta, which hopes to use the chip to power its AI products after their release, plans to launch this chip in 2027, according to three people involved in its development.

Tan personally has a lot riding on his ability to keep monetizing the AI boom. The Broadcom CEO is already wealthy from the increased value of his nearly $500 million stake in Broadcom and around $200 million in pre-tax income from selling shares over the past 18 months, but he could earn substantially more under a new compensation structure. In September, Broadcom’s board approved awarding him 1.8 million shares—a stake currently worth around $700 million—if he boosts AI revenue to $120 billion by the end of 2030.

That’s a lofty goal, and generally, Wall Street observers think he can meet it. So does his friend Philippe Laffont, the billionaire co-founder and principal of Coatue Management. “I would be shocked if Hock agreed to put something in writing that he didn’t think he had a 99.9% chance of beating—just knowing Hock,” said Laffont. “Hock never loses.”

Michael Hurlston, a former Broadcom senior vice president and longtime industry executive, knows exactly what people say about Tan behind his back.

“People think of him as some sort of ogre,” said Hurlston, who currently runs publicly traded Lumentum Holdings, a photonics and laser technology firm. “But that’s not true.” And then he added, “I think his empathy level is—I wouldn’t say it isn’t there, but he’s just connected to the business more than the people.”

In the last 15 years, Tan has purchased at least 11 companies, and in each case he has applied the same disciplined mentality to integrating the businesses into their new parent company. Laffont summed it up simply: “He’s the absolute best person at identifying interesting M&A targets, buying them and running a private equity–like playbook.”

Tan himself describes his approach somewhat differently. After he buys a company, he puts himself on a mission to identify which parts of it qualify as “diamonds” and which are “turds” (his words). As Tan jettisons all but the most profitable product lines and divisions, he tries to keep the diamonds and toss away the turds.

After acquiring VMware, for instance, Tan cut its portfolio from 8,000 different types of products to just four, choosing the ones he felt were most useful to its data center clients, according to a former Broadcom employee involved in VMware’s monetization strategy. He spun off a VMWare division focused on workplace virtualization tools, and after attempting to sell the company’s Carbon Black cybersecurity unit, he merged it into Symantec—but only after laying off roughly 80% of its employees, according to one former Carbon Black staffer.

Broadcom is known for conducting regular layoffs and reductions in force. At quarterly companywide meetings, Tan always includes a PowerPoint slide that lists each department by revenue growth—with a red horizontal line drawn across the chart that shows the third of the company with the weakest increases, three former employees recalled. Internally, Tan calls this “the line of doom”—any department below the line for multiple quarters is considered to be underperforming, sparking concerns among those employees that they may be next on the chopping block.

Despite the uncertainty that comes with being a Broadcom employee, people don’t seem to want to leave. The company reports a low voluntary attrition rate of 2.9%, slightly above Nvidia’s 2.7%. Multiple former employees cited the company’s high salaries, which includes large chunks of valuable RSUs.

The company rarely hires interns or recent graduates, preferring to hire a single seasoned engineer who could do the work of several junior staffers, the employees said. And unlike many tech companies with hundreds of vice presidents and senior vice presidents, Broadcom has fewer than 30, according to a September investor presentation. With so little hierarchy, “there’s nowhere to hide from Hock at Broadcom,” said Steven Dickens, a tech industry analyst who covers the company.

Even for the rare few who are in positions of power, “your degrees of freedom are very, very tight,” said Hurlston, who headed Broadcom’s wireless semiconductor business until 2017. According to him, Tan sets strict standards for profitability and headcount that leave little room for “big swings” inside the company. Another former Broadcom employee noted that exact timelines and revenue estimates are required for all products built within the company.

Tan doesn’t like to waste money backing moon-shot projects and instead invests heavily in a narrow selection of products that he thinks “are valuable and that people will pay for,” said Patrick Moorhead, head of tech analysis and advisory firm Moor Insights & Strategy. And Tan doesn’t count himself as a technology zealot or philosopher. In early September, the Broadcom CEO was asked a question at Goldman Sachs’ annual Communacopia + Technology Conference in San Francisco about where he saw AI going, the technology’s societal utility and whether it will live up to all the investments it has attracted. He recoiled at the question and sought to distance himself from Silicon Valley’s enthusiasm.

“I’m not a cheerleader. Or I try not to be,” he said. “It’s hard not to be here.”

Instead, the CEO has said his main skill lies in an ability to monetize technology—no matter what it is. That’s what Tan finds himself constantly obsessing over. “People have said his wife—his hobby—is this company,” said Hurlston. (For the record, Tan does have an actual human spouse—his second wife, Lya Truong.) One former Broadcom executive recalled Tan as so single-minded that he wouldn’t engage in small talk or discuss personal matters even on long car rides or plane trips. “It was silly to start a [personal] conversation because you knew it was about business.” According to this former executive, he and other higher-ups would sometimes escape Tan’s endless work talk on such outings by pretending to be asleep.

What Tan rarely wants to talk about is himself. Little is known about his family and his experience growing up in Penang, an island off the coast of Malaysia. When former Cisco CEO John Chambers asked him about immigrating to the U.S. in a friendly 2023 podcast interview, he offered a little glimpse, saying his family was “not well off,” but shared no further details.

His early years unfolded against the backdrop of the Malayan Emergency, a violent guerilla war between British colonial forces and pro-independence communist insurgents that began a few years before he was born. The conflict ended in 1960, three years after the Federation of Malaya declared independence, which later led to the creation of Malaysia.

As a teenager, Tan thought he’d become a doctor, but a high SAT score redirected his path, earning him a scholarship to the Massachusetts Institute of Technology. He arrived in the U.S. in 1971 and graduated four years later with a bachelor’s and a master’s in mechanical engineering.

He stayed in Boston to get an MBA from Harvard University, which is when he met his first wife, Lisa Yang. Yang became an investment banker, and he followed her to New York, where he had finance jobs at General Motors and PepsiCo. In the 1980s, he returned to Asia for nearly a decade, working at a Malaysian building materials conglomerate and a Singapore-based investment firm.

When he came back to the U.S., he spent two years as a vice president of finance at Commodore International shortly before the PC manufacturer’s bankruptcy. He then rose through the ranks to become CEO at Integrated Circuit Systems, a designer of timing chips that keep electronic devices in sync. He led a dramatic restructuring of the company, and then sold it to Integrated Device Technology for $1.7 billion in 2005.

The deal caught the attention of Silver Lake and KKR, which had together just bought Avago, a chip company spun off from Hewlett Packard. In 2006, they hired Tan to lead Avago and tasked him with reducing its bloat.

One former exec recalled an early Avago offsite where Tan loaded his top lieutenants into a bus and took them to a local airport hotel. “Most of the time people do offsites, they send them somewhere lavish or luxurious,” this person said. “I don’t think we even had food or water.”

After cutting costs at Avago and a handful of acquisitions, Tan pulled off his biggest feat in 2016: buying the much better-established Broadcom for $37 billion. The next year, he made an even bolder move when he initiated a $120 billion hostile bid for Qualcomm. The takeover attempt ended when the first Trump administration blocked the deal, citing national security concerns over U.S.-based Qualcomm falling into the hands of Broadcom, then domiciled in Singapore, where it received tax incentives. (Broadcom domiciled itself to the U.S. a month later.)

When the Qualcomm deal fizzled, Tan decided to hunt around for growth away from semiconductor acquisitions, said Hao, the Broadcom board member and Silver Lake partner. The solution: Tan started buying up software companies. And from 2019 to 2022, Broadcom shares went up 150%, far outpacing the Nasdaq’s roughly 55% gain.

Then ChatGPT launched. And almost overnight, Broadcom’s chips business, once dismissed as dull and slow growing, received a shot of fresh life.

Broadcom specializes in a very particular part of chip design. Generally, customers like Google, which began working with Broadcom in 2016, bring Broadcom the blueprint for a chip, and it handles the physical design and manufacturing, working with companies like Taiwan Semiconductor Manufacturing Co. The extent of Broadcom’s involvement varies depending on the partnership. Google, for example, handles more of the high-level technical design because of its expertise in this area; in partnerships with other companies, Broadcom will help with this part of the process as well.

While companies could work directly with chip foundries like TSMC and handle the entire chip design themselves, doing so could be risky. Broadcom has spent three decades designing chips and has a top-notch reputation for the quality of its custom products. As such, it can charge high prices for them, and in the past, Google and Broadcom have feuded over price hikes.

In addition, Broadcom sometimes pressures customers to purchase products in a bundle: Customers buying AI chip design work and intellectual property often must also take Broadcom’s switches and other hardware products, said two AI chip developers who interact with the company.

Cost is increasingly a concern for AI companies as they scale up their chip production. Tan’s aggressive negotiating tactics previously drove Amazon running to rival Marvell. Meanwhile, Google has added Taiwan-based MediaTek as a second chip design partner, reducing its historical reliance on Broadcom.

Despite these challenges, Broadcom seems well positioned to benefit from the momentum in custom chips. In October, for example, Anthropic said it planned to use 1 million tensor processing units, the chips Broadcom has co-designed with Google. And Meta is currently in talks with Google about committing billions of dollars to using TPUs in its data centers in 2027. Any demand for TPUs is a good sign for Broadcom.

Tan predicted last December that AI could drive new revenue for Broadcom ranging from $60 billion to $90 billion in 2027. Meanwhile, its chip partnership with OpenAI, announced in October, could generate up to $300 billion in revenue in the coming years, according to an estimate from JPMorgan Chase.

Though AI is Broadcom’s main focus moving forward, Tan has highlighted the importance of its software business as a stable counterweight to the fast-growing but lower-margin chips business.

Yet even as Broadcom approaches a $2 trillion market cap, Tan hasn’t lost any of his thriftiness. There is no companywide holiday party, and business travel is tightly restricted outside the senior leaders of the ASICs products division, according to one former employee. Those who do travel fly economy and stay in no-frills hotels, including Tan himself, this person said.

At Broadcom’s new Palo Alto headquarters, there are no free sodas, and even stationery is in short supply. “You have to buy your own rubber bands or Sharpies,” said a former Broadcom employee. “And you better remember to take them with you back to your desk or someone will steal them.”

While questions remain about the durability of the interest in AI and Broadcom’s chips, Tan, 74, may soon face another question about longevity: Who might succeed him?

In September, Tan said during Broadcom’s quarterly earnings call that he plans to stay on as CEO until 2030 “at least.” One former Broadcom predicted Tan will keep working right until his death as a very old man. “He’s going to be the Charlie Munger of tech,” said the former executive.

Nonetheless, there are indications that Broadcom is beginning to think about a post-Tan future. Charlie Kawwas, president of Broadcom’s semiconductor solutions group, has started appearing more frequently at Wall Street–facing events and on earnings calls. Kawwas, who has an electrical and computer engineering doctorate, joined Avago, the company that bought Broadcom, through its acquisition of semiconductor company LSI Corp., in 2014. He served as Broadcom’s chief sales officer and chief operating officer before he was promoted to president in 2022.

Kawwas sat on Tan’s right in a podcast conversation with OpenAI’s CEO Sam Altman and President Greg Brockman, published to OpenAI’s YouTube channel in October. In it, Kawwas highlighted that he talks with his counterpart at OpenAI at least once a week. Brockman gushed, “I feel like whenever I call Charlie, he’s in a different part of the world trying to secure capacity, trying to find a way to help us build what we’re trying to do together.”

Still, if Broadcom investor Laffont’s perspective is indication, there are plenty who aren’t quite ready to let go of Broadcom’s longtime leader. Said Laffont: “Every day, I think, I pray that he takes his vitamins and he eats well.”