Dialog Semiconductor has said its top customer Apple could build its own power-management chips into future iPhones rather than rely on the Anglo-German chipmaker, sending its shares plunging up to 19%.
The company, which analysts reckon derives more than half of its revenue from Apple, said there was no risk to its existing supply deals in 2018 and it was in the advanced stages of working with Apple on designing “2019-type products” that could lead to commercial contracts by next March.
“Our position remains that we have seen no material change to our ongoing relationship with Apple Inc,” chief executive Jalal Bagherli told investors on a conference call.
However, the company acknowledged for the first time that “Apple has the resources and capability to internally design a power-management integrated circuits and could potentially do so in the next few years.”
The circuits are vital to conserve battery life in products like Apple iPhones. Investors are wary of companies that rely heavily on Apple, which has cut out several small suppliers in the past.
The US technology giant said in April it planned to replace graphics chip supplier Imagination Technologies, sending its shares down 70% in a single session.
Imagination was subsequently sold off in two deals. The Nikkei business daily last week quoted one source as saying Apple would make about half the iPhone’s power-management chips starting next year, with another source saying this could be delayed to 2019.
Since then, Dialog shares have lost nearly a third of their value. Mr Bagherli said Apple’s feedback so far on 2019 product plans had been very good and that he expected to have more clarity by March on the terms of new business from Apple for 2019.
Semiconductor suppliers are typically barred by Apple from revealing their supply relationships.
Dialog, which has previously declined to name Apple, referring to it only obliquely as its “largest customer” or its “main business”, said it had received a special dispensation from Apple to mention it.
Dialog emphasised it “does not have reason to believe its current expectations of 2018 Apple business would be impacted” should Apple decide to design the chips itself.
The slide in its shares echoed one in April. The stock is off more than 40% since then.