On Monday, Dialog Semiconductor announced that its biggest customer Apple might build its own chips for power-management for future iPhones instead of relying on the chipmaker, helping to send the company’s shares plummeting up to 19%.
The company is believed to receive over half its revenue from making chips for Apple and said there was not any risk to its existing supply deals for 2018, and was in advanced stages of working with the Cupertino, California based Apple on designing products for 2019, that could lead to new commercial contracts as early as next March.
CEO Jalal Bagherli said the company’s position is that there is no material change to its current ongoing relations with iPhone maker Apple.
However, it was acknowledged by the company for just the first time that Apple holds the capability and resources internally to design PMIC and could possibly do so within the next couple of years.
PMIC’s are integrated power management services that are vital to the conservation of battery life for products such as iPhones.
Investors have become wary of businesses that rely too much on Apple, which has eliminated several of the small suppliers during the past.
The technology giant based in the U.S. said this past April it was planning to replace its supplier of graphics chips Imagination Technologies sending that stock down 70% in one session. Imagination was sold off following that in two different deals.
A source with Apple was quoted by the Nikkei business daily a week ago that said Apple would make approximately 50% of the power management chips for the iPhone in 2018, with one other source saying it might be delayed until 2019.
Since that time, Dialog shares lost close to one third of their prior value and were down over 15% in midmorning trading in Europe.
Bagherli said the feedback from Apple thus far relative to his product plans for 2019 has been very good and he expected much more clarity on the issue by March relative to terms of the new business for 2019 with Apple.
Dialog said it would give investors an update when more details become available, said the CEO.
Suppliers of semiconductors are barred typically by Apple from speaking about supply relationships. Dialog previously has declined to use the name Apple, referring only to its biggest customer, said it received a dispensation from the iPhone maker to mention its name.