£1.2bn deal to save British chip maker sunk by Apple

Battered tech firm plots bold reverse takeover to survive

A BRITISH maker of iphone chips has launched an audacious £1.2bn takeover for an American rival in a bid to survive a bruising bust-up with Apple.

Reading-based Dialog Semiconductor is in talks to buy US rival Synaptics – a bigger company – in a move that is seen as an attempt to protect itself from Apple.

The Silicon Valley is Dialog’s biggest customer, but it has recently gone to war with previously loyal suppliers by threatening to make its own chips.

It has put Apple at loggerheads with tech firms across the globe who claim it will not be able to do this without copying its technology.

In some cases, the decision has threatened to sink entire firms dependent on Apple revenues.

Already Apple has slashed orders of Dialog chips by almost a third.

Snapping up Synaptics would reduce Dialog’s dependence on the iphone maker – taking revenues from about three-quarters to less than half.

The board said: ‘No assurance can be given that any transaction will be agreed.’

Dialog makes power-management chips used in iphone and ipad devices. It thrived as Apple grew.

But since March 2017, Dialog’s shares have plummeted by 70pc after Apple signalled chip making would be taken in-house.

other companies have already been pushed to the verge of collapse.

Last year, Imagination Technologies, which makes iphone graphics chips, saw its share price go into freefall – wiping £500m off its value in a single day – after Apple said it was dropping it as a supplier.

Imagination argued the tech firm’s engineers could not have developed their own chips without using its technology. Its brutal fall from grace pushed bosses into seeking out potential buyers to save the company from ruin. It was later bought by Chinese state-funded Canyon Bridge.

Cardiff-based chip maker IQE, which makes components for the iphone, has also seen its shares tumble.

Investor jitters have also been fuelled by fears smartphone sales may have hit a peak, after the first ever drop in the final quarter of 2017.

Yesterday shares in Synaptics soared more than 10pc in early trading after Dialog revealed it was in talks with the American firm.

It was valued at about £1.4bn ($1.9bn) yesterday, compared to Dialog’s valuation of about £1bn (€1.1bn). Dialog said the aim of the deal was to boost its growth in the so-called internet of things and the mobile market. It said Apple’s decision to order fewer of its power management chips was likely to cause revenues to fall by 5pc this year. Synaptics would help Dialog sell different products like sensors, touch screens and touch pads to Apple, Samsung and other leading smartphone makers.

The deal would be Dialog’s second foray into the US in the last year after it bought privately-held Silego Technology, a chip maker, for about £210m in october.

Harald Schnitzer, an analyst at Germany’s DZ Bank AG, told Bloomberg: ‘Dialog is seeking to lower its dependency on Apple.

‘Therefore an acquisition could make sense, depending on the purchase price.’