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$600 Million Dialog Deal By Apple For Control Over Critical Chip Tech


10/11/2018


$600 Million Dialog Deal By Apple For Control Over Critical Chip Tech
Apple Inc is set to expend $600 million to take control of the power management technology which is at the core of functioning of the iPhones from the Anglo-German chip designer Dialog Semiconductor which also essentially puts the latter - a German-listed company, in the role of a supplier to the U.S. tech firm.    .
 
This deal is being identified to be an unusual one as well as the largest of its kind by Apple. It was way back in 2013, that Apple had made an acquisition of any substantial nature with the $350 million deal of acquisition of Face ID creator PrimeSense.
 
There was an increase of as much as 34 per cent5 in the shares of Dialog on Thursday following the news of the deal. The price was the highest was highest for the company since 2002. The deal is also expected to reduce the dependency of the German firm on Apple even as the iPhone maker is expected to account for three fourth of the revenues of the German firm this in the current year.
 
There was a drastic fall in the shares of Dialog following an announcement by Apple that it would purchase chips from other manufacturers. 
 
In an interview to the media, the Chief Executive of Dialog, Jalal Bagherli, has said that following the deal, the company can now go through a “managed, smooth” transformation of the business as the firm is seeking to venture and diversify into areas like Internet of Things  - including connected devices like home speakers, fitness trackers or smart watches.
 
Dialog power-management chips for extension of battery life in iPhones have been used by Apple since the launch of the first iPhones about a decade ago. The deal with Dialog would include related patents, a team of 300 engineers who have previous experience of working with manufacturing the chips used in iPhones and the Britain, Italy and Germany offices of the German company.
 
Dialog said that it would continue selling existing main power management integrated circuits (PMICs) to Apple and hence the revenues for the current year would not be impacted. Dialog is interested to get into the business of the so-called sub-PMICs – the current and future generations of it to Apple.
 
The main PMICs, which play a critical role in the function of Apple devices, is considered to be a strategic element by Apple and therefore it was seeking to gain direct control over it. However, for sub-PMICs, this was not the case because it is used to manage features such as on-board cameras.
 
The German firm expects that in 2022, about 35-40 percent of its total revenues would be accounted for by Apple after the completion of the deal.
 
The sheer size and demand for hips by Apple has caused problems for a number of other European chip designers in heir management of relationship with the US tech giant. For example, after Apple severed business relationship with the British chip designer Imagination Technologies, the firm was sold to a Chinese-backed fund last year.
 
“Dialog has bought itself much more than just time,” said Karsten Iltgen, an analyst at Bankhaus Lampe, which rates the stock ‘buy’. “Its Apple business has been clearly defined and put on a sound long-term footing.”
 
(Source:www.reuters.com)


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