Dialog Semiconductor confirms that it continues to supply Apple Inc., its largest customer, with customized power management integrated circuits (PMICs).
Dialog Semiconductor is finding out what happens when you put most of your eggs (or apples, perhaps) in one basket. Credit Suisse Group's price target indicates a potential upside of 63.37% from the company's previous close. Monday was the first time it has publicly acknowledged Apple could eventually replace its chips with in-house production.
The company's share price has been under pressure since reports emerged that Apple is working on its own power management chip, which could lead to less business for its usual supplier Dialog.
A lot is at stake. But Dialog's shares took a severe hit in the process, even as the company tried to reassure investors that it'll be in business with Apple for at least two years.
"This is a major disaster", said Tim Wunderlich, analyst at Hauck & Aufhauser. The brokerage said the reaction could prove overblown and that Apple may still decide to stick with Dialog rather than developing its own power chips.
However, the Anglo-German chipmaker conceded: "Apple has the resources and capability to internally design a PMIC and could potentially do so in the next few years".
The company said that it should have a better idea of future plans by March of next year.
But in comments reported by Reuters, Dialog's chief executive Dr. Jalal Bagherli said on a call to investors Monday that it would be some time before Apple's strategy for 2019 was understood.
The slide in Dialog shares echoed one in April, after Bankhaus Lampe analyst Karsten Iltgen advised investors to sell the stock because Apple was working on its own battery-saving chip.