Ap­ple se­cures Di­a­log’s fu­ture in $600m deal with the chip maker

The Daily Telegraph - Business - - Technology Intelligence - By Han­nah Boland

AP­PLE has struck a $600m (£455m) deal to buy a por­tion of Di­a­log Semi­con­duc­tor and en­ter into new sup­ply deals with the Read­ing-based com­pany, tak­ing on hun­dreds of the chip maker’s staff across Europe.

Ap­ple is pay­ing $300m to buy some of Di­a­log’s as­sets, in­clud­ing its Swin­don of­fice and sites in Italy and Ger­many, where there are more than 300 em­ploy­ees work­ing on re­search and de­vel­op­ment.

Ap­ple will trans­fer a fur­ther $300m to Di­a­log as a pre-pay­ment for prod­ucts to be de­liv­ered over the next three years, and the pair have struck a “broad range of new con­tracts” for the de­vel­op­ment and sup­ply of semi­con­duc­tor chips.

Di­a­log’s Frank­furt-listed shares surged 26.7pc to €21 yes­ter­day, as in­vestors wel­comed the clar­ity the deal pro­vides over the com­pany’s fu­ture.

Di­a­log had been thrown into tu­mult ear­lier this year, as ru­mours sug­gested it could be­come an­other vic­tim of Ap­ple’s ef­forts to re­duce its reliance on sup­pli­ers.

Fears mounted for the Bri­tish com­pany after it ad­mit­ted that Ap­ple had the “re­sources and ca­pa­bil­ity” to de­sign its own power-man­age­ment chips and “could po­ten­tially do so in the next few years”. Ap­ple had al­ready cre­ated one of the chips used on one of its plat­forms, re­duc­ing its reliance on Di­a­log, and the Bri­tish com­pany warned this trend was likely to con­tinue, with Ap­ple tak­ing more and more of its pro­duc­tion in-house.

Di­a­log said it had fi­nally come to a deal with Ap­ple by of­fer­ing to “ac­cel­er­ate what they’re try­ing to achieve, giv­ing them the IPs, the li­brary and the peo­ple who can de­sign more chips”, and in re­turn Ap­ple would mon­e­tise some of the as­sets Di­a­log had been build­ing in this area and al­low it to ven­ture into new busi­nesses.

“It is a pretty un­usual deal, and it’s quite cre­ative,” Di­a­log chief ex­ec­u­tive Jalal Bagherli said.

“For the last cou­ple of years there have been ru­mours that Ap­ple was do­ing its own power-man­age­ment chips. They see this as more and more strate­gic to man­ag­ing their de­sign and they wanted to do this in-house,” he added.

It comes just one week after Ap­ple be­came em­broiled in al­le­ga­tions China had planted so-called “spy chips” em­bed­ded in servers sold to US com­pa­nies. Bloomberg had re­ported Ap­ple was one of the com­pa­nies af­fected, al­though Ap­ple de­nied the re­port say­ing it had “never found ma­li­cious chips in [its] servers”.

Asked if Ap­ple was shift­ing pro­duc­tion in-house to avoid such al­le­ga­tions, Mr Bagherli said: “I think it clearly helps if you have con­trol over the chips you de­sign. You can con­trol any po­ten­tial hack­ing mea­sures so it does help. I’m not sure it is the pri­mary rea­son but it is an ad­di­tional rea­son.”

Ap­ple, which ac­counts for around three quar­ters of Di­a­log’s rev­enue, had al­ready dropped Bri­tish mi­crochip com­pany Imag­i­na­tion Tech­nolo­gies in favour of tak­ing its graph­ics tech­nol­ogy in-house.

That de­ci­sion had led to Imag­i­na­tion threat­en­ing le­gal ac­tion against Ap­ple, al­though the dis­pute was later called off after Imag­i­na­tion was bought by Bei­jing’s Canyon Bridge Part­ners.

Speak­ing about the tie-up with Ap­ple yes­ter­day, Mr Bagherli said the deal gave it a “clear strate­gic fo­cus”, and was in the “best in­ter­ests of [its] em­ploy­ees and share­hold­ers”.

The deal is ex­pected to com­plete in the first half of 2019. Qat­a­lyst Part­ners acted as fi­nan­cial ad­viser and Lin­klaters as le­gal coun­sel to Di­a­log.

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