Apple’s €521m Dialog deal

By Giles Turner and Nate Lanxon

Apple has signed a €521m deal with Dialog Semiconductor to license the UK chip designer’s power management technology and acquire certain assets, including more than 300 staff.

Apple will pay Dialog an initial $300m (€260.5m) plus an additional $300m for product delivery over the next few years.

The British firm also won a number of new contracts from the iPhone maker, including the supply of power management, audio subsystem, charging and mixed-signal integrated circuits.

Dialog’s shares rose as much as 34% in trading in Frankfurt. The deal comes almost a year after Dialog warned investors that Apple — its biggest customer —could design its own power-management chips in coming years. Dialog relies on Apple for about three-quarters of its revenue, predominantly through the supply of chips that handle charging and manage power in smartphones.

Dialog CEO Jalal Bagherli said the deal helps the semiconductor company scale down that reliance to “about 45%” over the next few years, and that “the licensing deal is non-exclusive, so we can use the IP for other customers without restrictions.”

Mr Bagherli said that “clearly if we have another $600m in the bank it helps us to not be reliant on borrowing for small deals at least”. While Apple has developed its own processors for years, the company only recently stepped up the in-house design of components, including graphics, Bluetooth and other phone-related chips. That’s expensive and creates new risks, but helps maintain leverage over suppliers after a wave of acquisitions cut the number of chipmakers it works with.

Apple began using its own graphics chips, or GPUs, in the iPhone 8 and iPhone X. That continued with the recently released iPhone XS and Apple Watch Series 4. Apple uses technology from another UK chip designer —Imagination Technologies —in products like the iPad and Apple TV but is expected to eventually transition all of its iOS-based products to its own graphics processors.

Following the deal with Apple, Dialog will concentrate on businesses including the Internet of Things, mobile, automotive and computing. Apple’s new hires consist of around 16% of Dialog’s total workforce.

The US company will also co-locate employees at some of Dialog’s facilities in Italy, Germany, and the UK. “Almost half” of Dialog’s employees across its two Swindon buildings would move to Apple.

Bloomberg

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