Apple brings iPhone power management in-house with $600M Dialog Semiconductor deal

Posted:
in General Discussion edited October 11
Apple is investing a total of $600 million to license patents, purchase assets and transfer employees from Dialog Semiconductor, a European chipmaker and existing business partner that entered Apple's supply chain with the first iPhones a decade ago.




Dialog announced the agreement in a press release on Thursday (PDF link), saying Apple will pay $300 million to license power management technologies and acquire more than 300 employees representing 16 percent of the firm's workforce, many of whom already work closely with Apple on various projects. The employees will remain in Europe and report to Apple SVP of Hardware Technologies Johny Srouji.

Apple is also taking over Dialog facilities in the U.K., Italy and Germany.

Along with the up-front cash payment, a separate $300 million outlay is earmarked for other Dialog assets and products to be delivered over the next three years.

At $600 million, the deal stands as one of Apple's biggest investments in an outside company. While it pales in comparison to 2014's $3 billion Beats buy, today's Dialog agreement dwarfs the $360 million purchase of Israeli firm PrimeSense and represents the largest assimilation of employees in company history.

"Dialog has deep expertise in chip development, and we are thrilled to have this talented group of engineers who've long supported our products now working directly for Apple," Srouji said in a statement. "Our relationship with Dialog goes all the way back to the early iPhones, and we look forward to continuing this long-standing relationship with them."

Today's news assuages concerns over the stability of Dialog's business, which has over the past decade become increasingly reliant on Apple component orders. Last November, reports claimed Apple was designing its own power management chips that would see integration in products like iPhone and iPad as soon as this year.

A month after rumors of an in-house PMIC surfaced, Dialog CEO Jalal Bagherli addressed the specter of being ousted from Apple's lucrative supply chain in an investor conference call. While he admitted the Cupertino tech giant had the technical capability to develop and outsource its own chips, Bagherli said Dialog was collaborating on "2019-type products" and expected to sign a contract order in March.

Dialog's relationship with Apple apparently sweetened in the intervening months.

Along with power management assets, and the employees to work on said technologies, Apple inked a "broad range" of new contracts for audio subsystem, charging and other mixed-signal integrated circuits, Dialog said today. The company expects revenue from said contracts to materialize in 2019 and accelerate over the following two years.

"This transaction reaffirms our long-standing relationship with Apple, and demonstrates the value of the strong business and technologies we have built at Dialog," Bagherli said in a statement. "Going forward, we will have a clear strategic focus, building on our custom and configurable mixed-signal IC expertise and world-class power-efficient design. Our execution track record, deep customer relationships, and talented employees give us great confidence in our future growth prospects."

Apple orders are estimated to account for approximately 75 percent of Dialog's 2018 revenue -- about $875 million generated from current generation main PMICs and another $150 million from sub-PMICs and other chips. Following the acquisition, Dialog intends to focus on "Internet of Things," automotive and industrial projects, a strategy set to decrease Apple-derived revenue to roughly 30 to 45 percent of the whole by 2022.

Navigating the sometimes treacherous waters that go hand-in-hand with being a major Apple supplier is no small feat, as evidenced by former partner Imagination Technologies. A European chipmaker specializing in GPU technology, Imagination lost Apple's business when the tech titan decided to design its own iPhone and iPad graphics architecture. After an unsuccessful "dispute resolution process," Imagination was ultimately sold off to a China-backed equity firm last year.

The Dialog asset acquisition bolsters Apple's efforts to bring important silicon development and design in-house. The ambitious initiative began in earnest with the first custom A-series system-on-chip -- the 2010 iPad's A4 -- and has since branched off into projects like AirPods' W1 wireless chip, Apple Watch S-series processors and Mac T-series security chips.

Apple's most advanced silicon design, the A12 Bionic, debuted last month with iPhone XS and incorporates a six-core CPU, four-core GPU and next-generation Neural Engine capable of processing 5 trillion operations per second.

Apple's deal with Dialog is expected to close in the first half of 2019 pending regulatory approval.

Comments

  • Reply 1 of 16
    gatorguygatorguy Posts: 19,290member
    Was just discussing that. I guess buying the talent rather than the company might become more common? Google did this earlier this year with HTC, buying up the engineering team and licensing the IP but leaving the rest of HTC on its own. Apple appears to be doing the same with Dialog and both seemingly for the same reasons: To take development matters into their own hands.
  • Reply 2 of 16
    Rayz2016Rayz2016 Posts: 4,218member
    Mmm.

    I wonder if it would have been better for Imagination to explore a similar deal, rather than accusing their biggest customer of  theft and demanding evidence that they could build their own GPU without infringing on their IP.

    Seems that Apple is taking over the whole widget from the outside in. 

    Great news, but I still think the weak link in the chain is Intel.



    edited October 11 netmageclaire1stanthemanjony0
  • Reply 3 of 16
    melgrossmelgross Posts: 31,060member
    Rayz2016 said:
    Mmm.

    I wonder if it would have been better for Imagination to explore a similar deal, rather than accusing their biggest customer of  theft and demanding evidence that they could build their own GPU without infringing on their IP.

    Seems that Apple is taking over the whole widget from the outside in. 

    Great news, but I still think the weak link in the chain is Intel.



    It was a strange thing with Imagination. Apparently Microsoft had the same problem with them. Both companies, comprising together, about 75% of their business, wanted Imagination to design chips that were custom to each of them, more reflecting what they needed. Imagination reportedly refused. Microsoft left as a customer first, and we know what happened with Apple.

    why Imagination refused their biggest customer’s requests is something I don’t know. But obviously, it wasn’t a good idea.

    likely, this deal with Dialog is mostly involving iOS hardware.
    edited October 11 netmagestantheman
  • Reply 4 of 16
    melgrossmelgross Posts: 31,060member
    If Apple has been 75% of their orders in 2018, I wonder why Apple didn’t just buy the entire company.
    claire1
  • Reply 5 of 16
    melgrossmelgross Posts: 31,060member
    gatorguy said:
    Was just discussing that. I guess buying the talent rather than the company might become more common? Google did this earlier this year with HTC, buying up the engineering team and licensing the IP but leaving the rest of HTC on its own. Apple appears to be doing the same with Dialog and both seemingly for the same reasons: To take development matters into their own hands.
    What I don’t u derstand is that while it’s easy to get what Google did with HTC, because they bought a small portion of what HTC was at the time, what Apple is buying, and licensing, here, is most of the company’s IP, and a very large percentage of the employees. Apple could keep a lot of Dialog’s IP and technology out of the hands of others if they just bought the company.

    there are other companies Apple could have bought, over the years, that could have shut out rivals from a major technology. Apple doesn’t seem interested in doing that. I wonder why. It’s not as thought regulators would care.
    claire1
  • Reply 6 of 16
    melgross said:
    gatorguy said:
    Was just discussing that. I guess buying the talent rather than the company might become more common? Google did this earlier this year with HTC, buying up the engineering team and licensing the IP but leaving the rest of HTC on its own. Apple appears to be doing the same with Dialog and both seemingly for the same reasons: To take development matters into their own hands.
    What I don’t u derstand is that while it’s easy to get what Google did with HTC, because they bought a small portion of what HTC was at the time, what Apple is buying, and licensing, here, is most of the company’s IP, and a very large percentage of the employees. Apple could keep a lot of Dialog’s IP and technology out of the hands of others if they just bought the company.

    there are other companies Apple could have bought, over the years, that could have shut out rivals from a major technology. Apple doesn’t seem interested in doing that. I wonder why. It’s not as thought regulators would care.
    First, while their technology is excellent, Dialog doesn't have a monopoly in the area that it competes, and has many companies that already have licenses to use their technology and products, so there isn't "shutting out rivals from a major technology."  Second, Dialog has many components that are of no use/interest to Apple for any number of reasons such as Apple having superior technology, e.g., haptics.  It wouldn't make sense for Apple to pay for those aspects of Dialog and then have to manage them. Instead, Apple bought the IP, people (BTW it was only 16% of the workforce, not a "very large percentage" ) and facilities it needed and Dialog can deal with the rest. 
    edited October 11 netmagerandominternetperson
  • Reply 7 of 16
    melgrossmelgross Posts: 31,060member
    Notsofast said:
    melgross said:
    gatorguy said:
    Was just discussing that. I guess buying the talent rather than the company might become more common? Google did this earlier this year with HTC, buying up the engineering team and licensing the IP but leaving the rest of HTC on its own. Apple appears to be doing the same with Dialog and both seemingly for the same reasons: To take development matters into their own hands.
    What I don’t u derstand is that while it’s easy to get what Google did with HTC, because they bought a small portion of what HTC was at the time, what Apple is buying, and licensing, here, is most of the company’s IP, and a very large percentage of the employees. Apple could keep a lot of Dialog’s IP and technology out of the hands of others if they just bought the company.

    there are other companies Apple could have bought, over the years, that could have shut out rivals from a major technology. Apple doesn’t seem interested in doing that. I wonder why. It’s not as thought regulators would care.
    First, while their technology is excellent, Dialog doesn't have a monopoly in the area that it competes, and has many companies that already have licenses to use their technology and products, so there isn't "shutting out rivals from a major technology."  Second, Dialog has many components that are of no use/interest to Apple for any number of reasons such as Apple having superior technology, e.g., haptics.  It wouldn't make sense for Apple to pay for those aspects of Dialog and then have to manage them. Instead, Apple bought the IP, people (BTW it was only 16% of the workforce, not a "very large percentage" ) and facilities it needed and Dialog can deal with the rest. 
    Dialog has more than a few FRAND licensed patents, as well as non FRAND patents. So yes, Apple could hobble there’s.

    if Apple is 75% of their business, then buying the company outright gives them that majority, in dollars. The rest could be sold off if necessary.
    claire1jony0
  • Reply 8 of 16
    Rayz2016Rayz2016 Posts: 4,218member
    melgross said:
    gatorguy said:
    Was just discussing that. I guess buying the talent rather than the company might become more common? Google did this earlier this year with HTC, buying up the engineering team and licensing the IP but leaving the rest of HTC on its own. Apple appears to be doing the same with Dialog and both seemingly for the same reasons: To take development matters into their own hands.
    What I don’t u derstand is that while it’s easy to get what Google did with HTC, because they bought a small portion of what HTC was at the time, what Apple is buying, and licensing, here, is most of the company’s IP, and a very large percentage of the employees. Apple could keep a lot of Dialog’s IP and technology out of the hands of others if they just bought the company.

    there are other companies Apple could have bought, over the years, that could have shut out rivals from a major technology. Apple doesn’t seem interested in doing that. I wonder why. It’s not as thought regulators would care.
    Because if you need to buy up companies to starve your competitors then that’s pretty much an admission that your products aren’t good enough to stand on their own. 
    randominternetpersonbadmonk
  • Reply 9 of 16
    melgrossmelgross Posts: 31,060member
    Rayz2016 said:
    melgross said:
    gatorguy said:
    Was just discussing that. I guess buying the talent rather than the company might become more common? Google did this earlier this year with HTC, buying up the engineering team and licensing the IP but leaving the rest of HTC on its own. Apple appears to be doing the same with Dialog and both seemingly for the same reasons: To take development matters into their own hands.
    What I don’t u derstand is that while it’s easy to get what Google did with HTC, because they bought a small portion of what HTC was at the time, what Apple is buying, and licensing, here, is most of the company’s IP, and a very large percentage of the employees. Apple could keep a lot of Dialog’s IP and technology out of the hands of others if they just bought the company.

    there are other companies Apple could have bought, over the years, that could have shut out rivals from a major technology. Apple doesn’t seem interested in doing that. I wonder why. It’s not as thought regulators would care.
    Because if you need to buy up companies to starve your competitors then that’s pretty much an admission that your products aren’t good enough to stand on their own. 
    No it’s not. It just gives you a competitive advantage for a longer time.

    for example, when Apple came out with Touch ID, they first bought the leading company making them. It took other phone makers two years to come out with a similar technology that the second best company had developed. Those two years gave Apple a useful advantage.
    StrangeDaysclaire1
  • Reply 10 of 16
    melgross said:
    Rayz2016 said:
    melgross said:
    gatorguy said:
    Was just discussing that. I guess buying the talent rather than the company might become more common? Google did this earlier this year with HTC, buying up the engineering team and licensing the IP but leaving the rest of HTC on its own. Apple appears to be doing the same with Dialog and both seemingly for the same reasons: To take development matters into their own hands.
    What I don’t u derstand is that while it’s easy to get what Google did with HTC, because they bought a small portion of what HTC was at the time, what Apple is buying, and licensing, here, is most of the company’s IP, and a very large percentage of the employees. Apple could keep a lot of Dialog’s IP and technology out of the hands of others if they just bought the company.

    there are other companies Apple could have bought, over the years, that could have shut out rivals from a major technology. Apple doesn’t seem interested in doing that. I wonder why. It’s not as thought regulators would care.
    Because if you need to buy up companies to starve your competitors then that’s pretty much an admission that your products aren’t good enough to stand on their own. 
    No it’s not. It just gives you a competitive advantage for a longer time.

    for example, when Apple came out with Touch ID, they first bought the leading company making them. It took other phone makers two years to come out with a similar technology that the second best company had developed. Those two years gave Apple a useful advantage.
    Given that we've seen Apple do exactly what you suggest with other companies, it suggests that Apple considered that option here and had reasons for doing it differently this time around.
  • Reply 11 of 16
    Rayz2016Rayz2016 Posts: 4,218member
    melgross said:
    Rayz2016 said:
    melgross said:
    gatorguy said:
    Was just discussing that. I guess buying the talent rather than the company might become more common? Google did this earlier this year with HTC, buying up the engineering team and licensing the IP but leaving the rest of HTC on its own. Apple appears to be doing the same with Dialog and both seemingly for the same reasons: To take development matters into their own hands.
    What I don’t u derstand is that while it’s easy to get what Google did with HTC, because they bought a small portion of what HTC was at the time, what Apple is buying, and licensing, here, is most of the company’s IP, and a very large percentage of the employees. Apple could keep a lot of Dialog’s IP and technology out of the hands of others if they just bought the company.

    there are other companies Apple could have bought, over the years, that could have shut out rivals from a major technology. Apple doesn’t seem interested in doing that. I wonder why. It’s not as thought regulators would care.
    Because if you need to buy up companies to starve your competitors then that’s pretty much an admission that your products aren’t good enough to stand on their own. 
    No it’s not. It just gives you a competitive advantage for a longer time.

    for example, when Apple came out with Touch ID, they first bought the leading company making them. It took other phone makers two years to come out with a similar technology that the second best company had developed. Those two years gave Apple a useful advantage.
    Have to disagree. Apple tends to buy to accelerate its own plans, rather than hold others back. 

    Which explains why they just bought what they needed from this outfit, rather than taking the whole lot off the market for their competitors. 
    badmonk
  • Reply 12 of 16
    claire1claire1 Posts: 478unconfirmed, member
    I agree with 600 million why didn't they buy the company?

    Didn't even know you could buy a select employees. Weird.
  • Reply 13 of 16
    melgrossmelgross Posts: 31,060member
    melgross said:
    Rayz2016 said:
    melgross said:
    gatorguy said:
    Was just discussing that. I guess buying the talent rather than the company might become more common? Google did this earlier this year with HTC, buying up the engineering team and licensing the IP but leaving the rest of HTC on its own. Apple appears to be doing the same with Dialog and both seemingly for the same reasons: To take development matters into their own hands.
    What I don’t u derstand is that while it’s easy to get what Google did with HTC, because they bought a small portion of what HTC was at the time, what Apple is buying, and licensing, here, is most of the company’s IP, and a very large percentage of the employees. Apple could keep a lot of Dialog’s IP and technology out of the hands of others if they just bought the company.

    there are other companies Apple could have bought, over the years, that could have shut out rivals from a major technology. Apple doesn’t seem interested in doing that. I wonder why. It’s not as thought regulators would care.
    Because if you need to buy up companies to starve your competitors then that’s pretty much an admission that your products aren’t good enough to stand on their own. 
    No it’s not. It just gives you a competitive advantage for a longer time.

    for example, when Apple came out with Touch ID, they first bought the leading company making them. It took other phone makers two years to come out with a similar technology that the second best company had developed. Those two years gave Apple a useful advantage.
    Given that we've seen Apple do exactly what you suggest with other companies, it suggests that Apple considered that option here and had reasons for doing it differently this time around.
    Of course. Since none of us here know why, it’s just supposition on any of our parts. I’m just wondering why. I’m not saying they should have done it.
  • Reply 14 of 16
    melgrossmelgross Posts: 31,060member

    Rayz2016 said:
    melgross said:
    Rayz2016 said:
    melgross said:
    gatorguy said:
    Was just discussing that. I guess buying the talent rather than the company might become more common? Google did this earlier this year with HTC, buying up the engineering team and licensing the IP but leaving the rest of HTC on its own. Apple appears to be doing the same with Dialog and both seemingly for the same reasons: To take development matters into their own hands.
    What I don’t u derstand is that while it’s easy to get what Google did with HTC, because they bought a small portion of what HTC was at the time, what Apple is buying, and licensing, here, is most of the company’s IP, and a very large percentage of the employees. Apple could keep a lot of Dialog’s IP and technology out of the hands of others if they just bought the company.

    there are other companies Apple could have bought, over the years, that could have shut out rivals from a major technology. Apple doesn’t seem interested in doing that. I wonder why. It’s not as thought regulators would care.
    Because if you need to buy up companies to starve your competitors then that’s pretty much an admission that your products aren’t good enough to stand on their own. 
    No it’s not. It just gives you a competitive advantage for a longer time.

    for example, when Apple came out with Touch ID, they first bought the leading company making them. It took other phone makers two years to come out with a similar technology that the second best company had developed. Those two years gave Apple a useful advantage.
    Have to disagree. Apple tends to buy to accelerate its own plans, rather than hold others back. 

    Which explains why they just bought what they needed from this outfit, rather than taking the whole lot off the market for their competitors. 
    But they have done it before. The companies they bought, in some cases, did have products that were sold to others that Apple didn’t need, as far as we know. Apple bought them, and discontinued the product lines.

    making general statements about what Apple has done, or not done is difficult, because for every example given one way, there’s another the other way. The Touch ID manufacturer made other switching products that, as far as we know, Apple hasn’t used.
    edited October 12
  • Reply 15 of 16
    steveausteveau Posts: 190member
    A neat deal and classic vertical integration. I wonder who taught Tim business economics when he did his MBA at Duke?
  • Reply 16 of 16
    Rayz2016 said:
    Mmm.

    I wonder if it would have been better for Imagination to explore a similar deal, rather than accusing their biggest customer of  theft and demanding evidence that they could build their own GPU without infringing on their IP.

    Seems that Apple is taking over the whole widget from the outside in. 

    Great news, but I still think the weak link in the chain is Intel.



    Well, all signs point to less than 2 years before Intel is no longer in the equation. (Except for modems.)
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