Dialog Semiconductor PLC’s shares on Tuesday plunged the most in more than 16 years after an analyst warned that Apple Inc would probably cut back on the use of the company’s power-management chips.
“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,” Bankhaus Lampe analyst Karsten Iltgen said in a research note published on Tuesday.
A shift to Apple developing its own chips in-house is unlikely in the short term, he said.
Dialog stock sank 20 percent to 38.26 euros at 12:05pm in Frankfurt, giving the company a market value of 2.98 billion euros (US$3.16 billion). It earlier dropped as much as 36 percent, its biggest intraday decline since Dec. 18, 2000.
Apple suppliers have been hit recently.
Last week, Apple notified Imagination Technologies Group PLC that it would stop using the British company’s graphics technology within the next two years.
The news sent Imagination’s shares down 62 percent on Monday last week, as 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,” Iltgen said. “We hear from the industry that about 80 engineers at Apple are already working on a PMIC [power management IC] 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 Dialog and Apple did not respond to requests for comment.
Dialog, which supplies chips to Apple’s iPhones and iPads, employs about 1,300 engineers, predominately in the UK.
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 was not authorized to speak on the topic.
Due to the close nature of Dialog’s relationship with Apple, it is not 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 last week statement 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,” Barclays PLC analyst Andrew Gardiner said 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.”
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