Dialog says not losing Apple power chip business in 2018


The stock has lost half its value since April on investor concerns that Apple is working on its own power chips.

Chipmaker Dialog Semiconductor has seen its shares drop by as much as 19% after admitting that its contract to supply power management chips to Apple could be at risk.

According to a regulatory filing on Tuesday, a subsidiary of Chinese chipmaker Tsinghua Unigroup Ltd increased its stake to 7.15 percent on November 30, the day Dialog shares fell by 20 percent on a report that Apple may design its own power-management chips. Since last Thursday, shares in the Frankfurt-listed company have fallen by a third. It has been under pressure after an article in the Nikkei Asian Review suggested that Apple could start using its own chips as early as next year.

"I would expect Dialog to experience declining sales from 2019 onward, intensifying gross margin pressure, (and) brain drain as uncertainties make the company a far less appealing employer for top talent", he added.

But investors have been spooked by reports in recent months that the United States tech giant has been poaching staff from Dialog.

Achal Sultania, an analyst with Credit Suisse, dubbed the intervention as "more damage than damage control".

In the past, Apple has barred semiconductor suppliers from revealing their supply relationships. This has meant companies including Arm Holdings, Imagination, Laird and Dialog have had to talk cryptically about the impact of "popular recently launched phones" in their financial statements.

Dialog Semiconductor (ETR:DLG) received a €31.00 ($36.90) price target from stock analysts at Morgan Stanley in a report issued on Wednesday. "Dialog management is aware that they need, more than ever, to deliver a chip that is competitive on features, price and timing", he said.

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