Dialog suffers on report of Apple in-sourcing
Dialog’s share price fell by a third before recovering to about €40 after Bankhaus Lampe issued a research note that Apple was working on its own power management ICs (PMICs) for future iPhones that could replace Dialog PMICs in 2019.
Apple is thought to be Dialog’s largest customer and responsible for as much as 60 percent of Dialog sales. Dialog’s fill revenue in 2016 was about $1.2 billion, down 12 percent from 2015.
The bad news for Dialog comes a few days after Imagination was warned that Apple was going to dispense with its services as a source of graphics rendering circuits (see Apple dumping GPUs: Imagination in discussions). This follows on from the in-sourcing of application processor design by Apple, albeit based on an architectural license from ARM.
However, the situation is not so bad for Dialog. It has two years to develop other customers and other business and has several chips besides PMICs it can sell into smartphones and other applications including wireless charging and fast wired charging circuits, audio ICs, wireless connectivity ICs.
Nonetheless Dialog has made two unsuccessful attempts to make major acquisitions to diversify beyond the consumer electronics sector. In 2014 it attempted to merge with Austria’s AMS but the talks broke down when the parties could not agree terms (see AMS, Dialog merger talks fail). In 2015 Dialog attempted to acquire Atmel Corp. of the US only to have deal snatched away by Microchip Technology Inc. at the beginning of 2016 (see Atmel drops Dialog, says Microchip’s takeover bid is better).
According to reports other financial analysts have said Apple suppliers such as Broadcom, Qorvo and Skyworks Solutions are less likely to suffer from Apple in-sourcing as Apple is not expected to develop its own RF chips. Similarly, Apple is unlikely to kick out Cirrus Logic, a supplier of audio ICs, the reports said. However, touch-screen controller IC provider Synaptics could be at risk the reports said.
The launch of the next iPhone is expected in the third quarter of 2017 and it is expected to drive a strong renewal cycle.
Related links and articles:
News articles:
Apple dumping GPUs: Imagination in discussions
ST raises capex for “major product ramp”
Atmel drops Dialog, says Microchip’s takeover bid is better
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