Apple to design its own power chips as early as 2018: Nikkei

FAN Editor
FILE PHOTO: The new iPhone X is pictured at the Apple Store Marche Saint-Germain in Paris
FILE PHOTO: The new iPhone X is pictured at the Apple Store Marche Saint-Germain in Paris, France, November 3, 2017. REUTERS/Benoit Tessier/File Photo

November 30, 2017

By Douglas Busvine

FRANKFURT (Reuters) – Apple Inc is designing its own main power management chips for use in iPhones as early as in 2018, the Nikkei business daily reported on Thursday, triggering slide of over 20 percent in shares of Dialog Semiconductor Plc.

If confirmed, the move would reduce Apple’s dependence on the Anglo-German chipmaker, which itself is heavily reliant on the smartphone industry and has been trying of late to diversify its customer base. Dialog stock was trading down 16 percent in Frankfurt trading at 31.01 at 1420 GMT on Thursday.

Investors are especially jittery after Apple said earlier this year it planned to replace another supplier, Imagination Technologies, a maker of graphics chips, sending the London-listed stock down 70 percent in a single session.

Following the collapse of its share price, Imagination put itself up for sale and it was sold off in two separate deals. In the past dozen years, Apple has dropped several smaller chip suppliers, forcing them to eventually merge with bigger players.

Responding to the Nikkei report, which quoted unnamed sources, a Dialog spokesman said its business situation had not changed.

“The level of visibility into the design cycle of our leading customers remains unchanged and the business relationships are in line with the normal course of business,” the spokesman said.

Apple did not immediately respond to a request for comment on the report.

“Based on Apple’s current plan, they are set to replace partially, or around half of its power management chips to go into iPhones by itself starting next year,” a source said, according to Nikkei. (http://s.nikkei.com/2Al5nSl)

A second person cited by Nikkei said that Apple was indeed developing power management chips for iPhones but that a rollout may be delayed until 2019.

Further, the Apple-designed chips would be solely manufactured by Taiwan Semiconductor Manufacturing Co , according to industry sources cited by the newspaper.

TSMC, the world’s biggest contract chipmaker, has been Apple’s sole supplier of core processor chips for iPhones since 2016 and it also makes Dialog’s power management chips.

The sell-off echoed one in April, when an analyst downgraded his rating on Dialog in a report that said Apple was working on its own battery-saving chip that could replace Dialog’s power management integrated circuits.

Company management typically does not comment on individual customers and has been guarded in its statements regarding the likely impact of Apple’s launch of the blockbuster iPhone X tenth anniversary model.

Speaking to investors in mid November, Chief Executive Jalal Bagherli said Dialog stood to benefit from up to six or seven new growth drivers that represented efforts to diversify, but refused to be drawn on any possible Apple boom.

Dialog derives more than half of all of its revenue from Apple, analysts estimate. Two years ago up to three-quarters of revenue came from being the sole supplier of power management chips for use in Apple devices.

(Additional reporting by Eric Auchard and Paul Sandle in London and Aishwarya Venugopal in Bengaluru; Editing by Shounak Dasgupta)

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