Dialog Semiconductor tanks as Apple close to developing own power chips

Apple will use power chips designed in-house for iPhone built in 2018, reports suggested on Thursday, sending shares in UK-based chip designer Dialog Semiconductor crashing.

Apple is designing its own main power management chips for use in iPhones, reported Nikkei, which would cut the tech giant's dependence on European-listed Dialog Semiconductor, which derives more than 70% of its revenues from its major US client.

The iPhone maker is wants to boost its semiconductor capabilities in order to better compete with rivals, sources told the Japanese news wire.

"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," said the source.

Another industry source suggested Apple would not be able to begin using its own chips until 2019.

In April, Dialog had also tanked after German analysts cut their rating on the stock due to the risk that Apple could start making its own microchips, although other analysts said these risks were being overdone.

Analysts at Bankhaus Lampe pointed to much stronger hiring of engineers of analogue and power management chips from Apple for more than a year, suggesting Apple was setting up power management design centres in Munich and California.

"We hear from the industry that about 80 engineers at Apple are already working on a PMIC with specific plans to employ it in the iPhone by as early as 2019," the bank said, noting that social networks revealed that Apple has already poached about 20 chip designers, some of them with long-standing experience from Dialog.

Earlier this year, shares in London-listed chip designer Imagination Technologies tumbled after Apple said it would stop using its graphics technology for new products as it had developed its own version of the hardware, having used similar tactics of hiring many Imagination engineers.

Bloomberg reported that Apple, which spends $11bn a year on R&D, had set up many labs near companies with a strong record in the various technological areas it was pushing into and that in several cases, these companies soon lost employees to the iPhone maker.

For example, Apple opened an office last year in Hertfordshire just seven miles from Imagination's headquarters and that its jobs website had listed numerous openings in the area related to graphics chips.