Another partner falls as Apple extends control over iPhone chips

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Screen Shot 2017-04-11 at 11.56.56
Dialog is the latest company to take a hit as Apple takes its chip business in-house.
Photo: Dialog Semiconductor

Update: Dialog Semiconductor says that its relationship with its key customer Apple hasn’t changed, despite what reports claim.

Apple currently employs around 80 engineers developing a proprietary power-management chip, claims a new report. If the effort succeeds, the company could ditch Anglo-German chipmaker Dialog Semiconductor, which it currently relies on for the iPhone, by 2019.

The news follows speculation that Apple is building its own GPU for iOS devices, after parting ways with British company Imagination Technologies, which previously provided Apple with graphics processing units.

Just as happened with Imagination Technologies, Dialog Semiconductor received a negative jolt to its valuation based on the news. Shares fell by as much as one-third after financial analyst Bankhaus Lampe cut its rating on Dialog from “hold” to “sell” after publishing a research note, describing Apple’s move.

Apple accounted for more than 70 percent of Dialog’s sales last year.

“In our view, there is strong evidence that Apple is developing its own PMIC and intends to replace the chip made by Dialog at least in part,” Bankhaus Lampe analyst Karsten Iltgen noted. Apple is also said to be busy “poaching” Dialog engineers in Munich.

Again, this is similar to Imagination Technologies, whose talent Apple has allegedly been poaching to build its own GPU team.

By building its own custom chips, Apple should be able to better control R&D as well as lowering its margins, thereby making more profit.

Source: Reuters