Dialog Semiconductor Tumbles After Analyst's Apple WarningBy
Curse of the Apple suppliers continues after Imagination Tech
Dialog shares fall the most in 16 years following Lampe note
“There is strong evidence that Apple is developing its own power-management integrated circuits and intends to replace the chip made by Dialog at least in part,” Karsten Iltgen, analyst at Bankhaus Lampe, said in a research note published Tuesday. A shift to Apple developing its own chips in-house is unlikely in the short term, he said.
Dialog’s stock sank 20 percent to 38.26 euros at 12:05 p.m. in Frankfurt, giving the company a market value of 2.98 billion euros ($3.2 billion). It earlier dropped as much as 36 percent, the biggest intraday decline since Dec. 18, 2000.
The chip-maker confirmed its first quarter guidance in a statement, and said that it knew of no reason for the share price movement.
Suppliers of Apple have been hit recently. Last week, Apple notified Imagination Technologies Group Plc that it will no longer be using the British company’s graphics technology within the next two years. The news sent Imagination’s shares down 62 percent on April 3. Apple is Imagination’s largest customer, providing just over half its revenue.
Apple also dominates Dialog’s supply chain. Reading, England-based Dialog gets about 74 percent of its sales from Apple.
“We believe that Apple is setting up power-management design centers in Munich and California,” said Iltgen. “We hear from the industry that about 80 engineers at Apple are already working on a PMIC with specific plans to employ it in the iPhone by as early as 2019.”
Bankhaus Lampe downgraded Dialog to a sell rating from hold. Spokespeople from didn’t respond to requests for comment.
Dialog, which supplies chips to Apple’s iPhones and iPads, employs about 1,300 engineers, predominately in the U.K.
Apple has been busy taking in-house development work for its graphic processing units. The Cupertino, California-based company is designing a new chip for future Mac laptops that would take on more of the functionality now handled by Intel Corp. processors. Apple already designs its own smartphone processors, obviating the need to turn to Qualcomm Inc. or another supplier for chipsets.
There has been a steady flow of engineers from Dialog to Apple over the past year, according to a person familiar with the situation who wasn’t authorized to speak on the topic. Due to the close nature of Dialog’s relationship with Apple, it isn’t unusual to see a steady flow of employees to and from the two companies, the person said.
However, over the past year Apple also hired several people from fellow supplier Imagination, including former Chief Operating Officer John Metcalfe as a senior director based in London. Imagination said in its statement last week that Apple "has asserted that it has been working on a separate, independent graphics design in order to control its products."
Other Apple suppliers were also dragged down by signals of the technology giant’s increasing self-reliance, with sensor makers AMS AG and STMicroelectronics NV declining as much as 10 percent and 4.3 percent, respectively.
Not everyone agrees that Dialog is at risk. “We do not see them remotely in a similar position," said Andrew Gardiner, an analyst at Barclays Plc, in a research note. "We acknowledge Apple’s continued hiring of engineers, in power management and elsewhere, but an additional 80 engineers hired in this area pales in comparison to the over 1,300 engineers Dialog employed at the end of last year."
— With assistance by Kasper Viita