UK Edition
iPhone supplier Dialog slumps as it reveals Apple could bring power chip technology in-house
Shares in Dialog Semiconductor have slumped after the iPhone power chip maker raised the prospect of becoming the latest British firm to lose business from Apple.
The Reading-headquartered company admitted for the first time that Apple has the “resources and capability” to design its own power management chips, sending shares down by 20pc on Monday.
The announcement compounded a blow last week when the Japanese newspaper Nikkei reported that Apple is considering ditching Dialog, which had also caused a dramatic share price fall. Since last Thursday, shares in the Frankfurt-listed company have fallen by a third.
Dialog has designed the iPhone’s power chips for a decade and relies on Apple for around three quarters of its revenue.
But investors have been spooked by reports in recent months that the US tech giant has been poaching staff from Dialog. Although Monday’s market announcement was designed to clear the air, the confirmation that Apple has a team capable of building its own chips failed to invoke confidence.
Apple has been trying to reduce its reliance on suppliers as it seeks greater control of the iPhone production process and amid turbulence in the microchip industry, recently ditching British graphics chip designer Imagination Technologies.
Dialog produces a number of power chips for various parts of the iPhone and other Apple gadgets, and although Monday’s announcement only referred to one of these, it was interpreted as a step towards Apple bringing production in house.
The company denied reports that the change could happen as soon as next year, saying it had already agreed to supply chips to Apple in 2018, and said it had begun work on 2019 designs.
“We believe these concerns may not go away and rather keep getting pushed from one year to another,” analysts at Credit Suisse said.
“Although Dialog expects to remain Apple’s main supplier of PMIC [power management integrated circuits] designs, Dialog recognizes Apple has the resources and capability to internally design a PMIC and could potentially do so in the next few years,” it said.
“Dialog does not have reason to believe its current expectations of 2018 Apple business would be impacted by such potential actions by Apple.”
Apple binds its suppliers to strict non-disclosure agreements about working with the company, with manufacturers often forced to refer to the iPhone maker as “our largest customer”. Dialog received special dispensation to talk about the situation, which it said was proof of a strong relationship with Apple.