Shares in chipmaker Dialog plunge over Apple contract doubts

Joanna Estrada
April 15, 2017

Apple is now working with Germany's Dialog Semiconductor which said it has already designed the battery management chips for the iPhones set to release in 2017 and 2018.

The news that Apple might be shifting towards a more self-reliant chip production model has slightly scared the semiconductor sector as a whole. Dialog Semiconductor Plc led technology shares lower after Bankhaus Lampe warned that Apple Inc. may cut back on its use of the company's chips. They recovered around half of that in later trading. Dialog's stock was down 15.71% to 40.80 euros ($43.19) per share as of noon Eastern Standard Time on Tuesday.

Following concerns that Apple could displace Imagination Technologies and Dialog Semiconductor with an internal solution, Pacific Crest evaluates the potential risk that other suppliers could be displaced by Apple in the future. Lampe said it believes that Apple is setting up PMIC design centers in Munich and California, CNBC reported.

Iltgen is a four-star rated analyst for the accuracy of his earnings estimates on Dialog and ranks sixth among 16 analysts covering the stock, according to Thomson Reuters data.

Apparently, Apple is poaching top Dialog engineers in Munich so that it has the knowledge in place to build the chip.

The Apple operation has reached a size that is starting to represent a threat for Dialog, according to Iltgen, who believes that a complete shift to Apple's in-house development is unlikely in the short term. Last week, the firm revealed that Apple was planning to replace their graphics chips with in-house parts.

"The teams of both companies collaborate very closely and thus, Dialog can not be replaced by a third-party supplier". A merger talk between AMS AG (AMS.S), an Austrian sensor chip and Dialog went sour in 2014. Its plans to buy USA -based Atmel in 2015 were derailed after Microchip swooped in with a higher bid.

So far, Imagination is the only Apple supplier to have confirmed that it'll lose Apple's business at some point in the next two years. Power management chips manage voltage and charging across the components in a mobile device.

Expectations for a strong iPhone upgrade cycle in late 2017 had been rising, sending chip stocks up. The company's shares fell by 36 percent marking a seven-month low.

Other reports by Click Lancashire

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