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Dialog acknowledges Apple could design its own power chips; shares tumble

Investors are wary of companies that rely heavily on Apple, which has cut out several small suppliers in the past.

Reuters  |  London/Frankfurt 

Dialog Semiconductor, Apple
Dialog semiconductor

said on Monday top customer could build its own into future rather than rely on the Anglo-German chipmaker, sending its shares plunging as much as 19 per cent.

The company, which analysts reckon derives more than half of its revenue from Apple, said there was no risk to its existing supply deals in 2018 and it was in the advanced stages of working with on designing "2019-type products" that could lead to commercial contracts by next March.

"Our position remains that we have seen no material change in our ongoing relationship with Inc," Chief Executive Jalal Bagherli told investors on a conference call.

However, the company acknowledged for the first time that "has the resources and capability to internally design a and could potentially do so in the next few years."

PMICs are power-management integrated circuits that are vital to conserving battery life in products like

Investors are wary of companies that rely heavily on Apple, which has cut out several small suppliers in the past.

The US giant said in April it planned to replace graphics chip supplier Imagination Technologies, sending its shares down 70 per cent in a single session. Imagination was subsequently sold off in two separate deals.

The Nikkei business daily last week quoted one source as saying would make about half the iPhone's starting next year, with another source saying this could be delayed to 2019. (http://s.nikkei.com/2Al5nSl)

Since then, Dialog shares have lost nearly a third of their value. At 1035 GMT, they were down 15.2 per cent at 26.47 euros.

Bagherli said Apple's feedback so far on 2019 product plans had been "very good" and that he expected to have more clarity by March on the terms of new business from for 2019. The dialogue would update investors when it had more details, he said.

Semiconductor suppliers are typically barred by from revealing their supply relationships. Dialog, which has previously declined to name Apple, referring to it only obliquely as its "largest customer" or its "main business", said it had received a special dispensation from to mention it.

Dialog emphasised it "does not have reason to believe its current expectations of 2018 business would be impacted" should decide to design the chips itself.

Dialog, itself heavily reliant on the smartphone industry, said it was aware that in order to remain a key supplier to it would have to continue to meet the US company's "technology, quality, price and volume expectations".

The slide in its shares echoed one in April, after Bankhaus Lampe analyst Karsten Iltgen advised investors to sell the stock because was working on its own battery-saving chip. The stock is off more than 40 per cent since then.

($1 = 0.8434 euros)

 

 

First Published: Mon, December 04 2017. 16:32 IST
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