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