Apple Will Ditch Dialog, Design Own Power Chips – Report

Apple is reportedly working on an in-house power management chip for its iPhones that will, from next year, replace the technology it currently sources from Dialog Semiconductor.

The move was reported by Japan's Nikkei Asian Review, which cites industry sources, and would represent the latest effort by the iPhone maker to become less reliant on third parties for the technology in its products.

Initial reporting by Nikkei wiped about a fifth off Dialog's share price on Thursday, which closed down 18%, at €30.65 ($36.44), in Frankfurt. Shares were trading at €31.28 ($37.18) in Frankfurt today at the time of publication.

According to one Nikkei source, Apple Inc. (Nasdaq: AAPL) initially plans to replace around half of its iPhone power management chips, which control charging and energy use, although another source said the timing of the switch was uncertain and that it might happen in 2019.

The plans would be calamitous for Dialog, which apparently derives about three quarters of its revenues from Apple. Apple is said to rely exclusively on Dialog Semiconductor plc for its main power management chips in iPhone, iPad and Apple Watch devices.

By developing more chips in-house, Apple would naturally become less dependent on a single supplier for one of the most expensive components in its devices. The move could also lead to further performance improvements -- analysts reckon Apple's products are less prone to glitches than other gear because the company already develops so much of its own hardware and software in-house.

Moreover, investments in semiconductor research and development could support expansion into new opportunities linked with artificial intelligence and machine learning, which will demand much greater processing power in future.

Nikkei's sources claim that Apple's new chips would be manufactured by contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC) (NYSE: TSM), which already makes core processor chips for iPhones.

The move away from Dialog would come just a few months after Apple announced that it would stop using graphics chips from the UK's Imagination Technologies and instead design its own processors in future.

Having derived about half of its revenues from Apple, Imagination sold itself to a private equity fund called Canyon Bridge in September. (See No Imagination: UK Chip Biz Goes Up for Sale, Eurobites: Imagination Cashes In Its Chips With Canyon Bridge for £550M and Eurobites: Imagination Sale Gets Investor Approval.)

— Iain Morris, News Editor, Light Reading

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