Dialog Semiconductor admits Apple 'has capability' to make own power chips

Dialog Semiconductor said on Monday that Apple, its largest client by far, could potentially design its own power management chips "in the next few years", sending shares in the UK-based, German-listed chip maker into red for the second day in a row.

On Thursday, it had been reported that Apple, from which Dialog derives more than 70% of its revenues, will begin to use power chips of its own design for iPhones built in 2018.

The US tech giant wants to boost its semiconductor capabilities in order to better compete with rivals, Nikkei had reported, with plans to replace around half of its power management chips.

Dialog said on Monday that it continues to supply Apple with customized power management integrated circuits (PMICs) across a range of platforms "without material change to its ongoing business relationship", which it said had been reflected in recent PMIC design wins and new design "engagements and opportunities".

The Reading-based company said it expects to remain Apple’s main supplier of PMIC designs, but "recognizes Apple has the resources and capability to internally design a PMIC and could potentially do so in the next few years".

It went on: "Dialog does not have reason to believe its current expectations of 2018 Apple business would be impacted by such potential actions by Apple."

"Dialog understands its continued role as Apple’s main PMIC supplier is contingent on Dialog meeting Apple’s technology, quality, price and volume expectations, as well as continuing to develop advanced technology to meet Apple’s requirements. Dialog intends to continue to closely support Apple in developing and supplying sophisticated next generation power management and mixed signal technology for use in Apple’s products."

On Friday analysts at Commerzbank said Dialog was likely to keep making chips for the iPhone.

In a note to clients on Friday that it was "as close as we can possibly be to 100% certain that Dialog will remain sole supplier for the core PMIC for the iPhone 2018".

Earlier this year, UK-based chip designer Imagination Technologies was brought to its knees after Apple said it would stop using its graphics technology for new products as it had developed its own version of the hardware.

In both cases analysts have suggested that Apple has strengthened its chip design capabilities by setting up design centres near its suppliers and hiring many of their engineers.

Analysts at Bankhaus Lampe reported in April that dozens of Dialog engineers had moved to Apple and were working on a PMIC with specific plans to employ it in the iPhone.