Apple Reportedly Developing Its Own iPhone Power Management Chip, Sending Dialog Shares Tumbling

It looks as though another Apple supplier might need to find an additional large customer or start thinking about a “Plan B”. Last week, it was reported that Imagination Technologies GPUs won’t be used in future iPhones (likely 2018 onwards), which sent shares in the company plunging by more than 70 percent. Today, it is Dialog Semiconductor’s time to face the music according to Bloomberg.

The publication is reporting that in its effort to bring more chip design in-house, Apple will drop Dialog as a supplier of the power management integrated circuits (PMIC) that go into every iPhone it sells. “There is strong evidence that Apple is developing its own power-management integrated circuits and intends to replace the chip made by Dialog at least in part,” said Bankhaus Lampe analyst Karsten Iltgen in a research note.

Iltgen went on say that Apple has a team of 80 engineers that are currently working on a homegrown PMIC at design centers located in California and Germany, and that the Apple chips could arrive in iPhones as early as 2019. Bloomberg, which often gets the scoop on the inner workings at Apple, says that there has been a “steady flow” of engineers joining Apple from Dialog during the past year.

Dialog shares are currently down over 13 percent on the news, and at one point fell by 36 percent earlier in the trading day, which was the company’s largest intraday collapse in nearly twenty years. Perhaps in an effort to calm anxious investors, Dialog issued the following statement this morning:

The Company knows of no business reason for this movement and confirms that it remains comfortable with its guidance for the first quarter and in its prospects for the year. The Company notes the level of visibility into the design cycle of its leading customers remains unchanged and the business relationships are in line with the normal course of business.

The smartphone market is incredibly cutthroat, and Apple — like any business — is looking for ways to increase profits. If that means going to an in-house design to the detriment of a long-term supplier, Apple won’t think twice about the move. Imagination Technologies found that out the hard way, as did PortalPlayer during in the iPod’s heyday.