Apple signs RM2.5b deal with Dialog for assets, staff

Following the deal with Apple, Dialog will concentrate on businesses including the IoT, mobile, automotive and computing

By BLOOMBERG

LONDON • Apple Inc has signed a deal with Dialog Semiconductor plc to licence the UK chip designer’s power management technology and acquire certain assets, including more than 300 staff.

Apple will pay Dialog an initial US$300 million (RM1.25 billion) plus an additional US$300 million for product delivery over the next few years. The British firm also won a number of new contracts from the iPhone maker, including the supply of power management, audio subsystem, charging and mixed-signal integrated circuits, according to a statement yesterday.

Dialog’s shares rose as much as 34% in trading in Frankfurt yesterday, the most since June 2000.

The deal comes almost a year after Dialog warned investors that Apple — its biggest customer — could design its own power-management chips in coming years. Dialog relies on Apple for about three-quarters of its revenue, predominantly through the supply of chips that handle charging and manage power in smartphones.

Dialog CEO Jalal Bagherli said in an interview yesterday that the deal helps the semiconductor company scale down that reliance to “about 45%” over the next few years, and that “the licencing deal is non-exclusive, so we can use the intellectual property for other customers without restrictions.”

Commenting on potential merger and acquisition activity as a result of the deal, Bagherli said that “clearly if we have another US$600 million in the bank, it helps us to not be reliant on borrowing for small deals at least”.

While Apple has developed its own processors for years, the company only recently stepped up the in-house design of components, including graphics, Bluetooth and other phone-related chips. That’s expensive and creates new risks, but helps maintain leverage over suppliers after a wave of acquisitions cut the number of chipmakers it works with.

Apple began using its own graphics chips, or GPUs, in the iPhone 8 and iPhone X. That continued with the recently released iPhone XS and Apple Watch Series 4. Apple uses technology from another UK chip designer — Imagination Technologies Group plc — in products like the iPad and Apple TV, but is expected to eventually transition all of its iOS-based products to its own graphics processors.

Following the deal with Apple, Dialog will concentrate on businesses including the Internet of Things (IoT), mobile, automotive and computing.

Apple’s new hires consist of around 16% of Dialog’s total workforce. The US company will also co-locate employees at some of Dialog’s facilities in Italy, Germany and the UK.

Bagherli said “almost half” of Dialog’s employees across its two Swindon, England buildings would move to Apple. He said one of these buildings would be “entirely taken over by Apple employees”, but that the impact on the workforce was small as employees for both companies already work closely together.

Dialog’s 2018 revenue will not be affected by this agreement and the company will continue shipments of current products in production to Apple, the company said in the statement.

Dialog will also launch a share buyback programme of up to 10% of its outstanding shares following its third-quarter trading update.