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Dialog shares tumble on warning Apple could build its own chips

Dialog shares tumble on warning Apple could build its own chips

CEO Jalal Bagherli said the company's position is that there is no material change to its current ongoing relations with iPhone maker Apple.

Dialog Semiconductor is finding out what happens when you put most of your eggs (or apples, perhaps) in one basket.

Dialog Semiconductor is now the only supplier of power management chips for the iPhone, and the company on Monday confirmed that Apple does indeed have the capability of designing its own silicon to handle various power-related aspects on iPhones. Credit Suisse Group's price target indicates a potential upside of 63.37% from the company's previous close.

This is, of course, not the first time that a company's shares have dived following fears over loss of Apple business ...

"Although Dialog expects to remain Apple's main supplier of power management integrated circuit (PMIC) designs, Dialog recognizes Apple has the resources and capability to internally design a PMIC and could potentially do so in the next few years", it said.

A lot is at stake.

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Dialog supplies power management chips for Apple's iPhones, iPads and watches which accounts for three-quarters of its revenues previous year.

"This is a major disaster", said Tim Wunderlich, analyst at Hauck & Aufhauser. But that may change in the future if Apple decides to drop it in favor of its own power management chips.

A source with Apple was quoted by the Nikkei business daily a week ago that said Apple would make approximately 50% of the power management chips for the iPhone in 2018, with one other source saying it might be delayed until 2019.

Apple did not respond to a request for comment. Dialog stock has lost more than 40% of its value since April when an analyst warned that Apple was working on its own battery-saving chip.

Imagination has since been sold to China-backed Canyon Bridge Capital Partners for -550 million ($740 million), well below the -2 billion ($2.7 billion) it was worth at its peak in 2012.