Analysis: Dialog finds a better way out from under Apple

October 11, 2018 // By Peter Clarke
Jalal Bagherli, the highly-respected CEO of Dialog Semiconductor plc, has negotiated his way out from a potentially company-threatening overexposure to consumer electronics and IT giant Apple Inc.

That exposure could be as much as 75 percent in 2018 and with Apple known to be generally following an in-sourcing strategy the situation needed managing.

There are strong parallels with the evolution of the relationship between Apple and Imagination but Bagherli appears to have done a better job. The markets appear to think so and Dialog's share price opened up about 25 percent on the news (see Apple to acquire PMIC capabilities, staff from Dialog).

The deal is set to cost Dialog 16 percent of its work force but should produce a nice pay off of $600 million over the next three years. In the longer term it may cost Dialog a massive chunk of revenue if Apple becomes self-sufficient in PMICs but Dialog hopes to retain some business outside the iPhone. Apple is expected to be responsible for 75 percent of Dialog revenue in 2018 but the deal does give Dialog three years to build revenues in other more exciting areas; IoT, automotive, computing and storage.

After all, the smartphone market is now not only thin on margin for suppliers but also lacking in growth. Higher compound annual growth rates (CAGRs) are forecast for automotive, industrial and 5G markets.

Dialog Semiconductor revenue profile. Source DIalog Semiconductor plc.

Dialog estimates that in 2022 Apple will be down to 30 to 35 percent of an increased annual revenue total.

Next: Compare and contrast with Imagination


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