Apple Swoops Up Engineers From Key Supplier as It Bolsters In-House Chip Design -- Update

Date : 10/11/2018 @ 9:17AM
Source : Dow Jones News
Stock : Apple Inc. (AAPL)
Quote : 168.63  -0.97 (-0.57%) @ 12:59AM

Apple Swoops Up Engineers From Key Supplier as It Bolsters In-House Chip Design -- Update

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By Anthony Shevlin and Tripp Mickle 

Apple Inc. has agreed to bring in house more than 300 engineers from one of its key suppliers, Europe-based Dialog Semiconductor PLC -- part of a $600 million deal that boosts the smartphone giant's chip-design operations.

Under the deal, Apple will transfer to its workforce a group of Dialog engineers who have already been supporting Apple's chip development, Dialog said early Thursday. The engineers represent about 16% of Dialog's total workforce.

Apple will pay Dialog $300 million in cash and prepay $300 million for Dialog products to be delivered over the next three years, Dialog said in a statement early Thursday. As part of the deal, Apple will also assume control of certain Dialog facilities in Italy, Germany and the U.K.

The Dialog deal is one of Apple's largest in terms of acquiring new staff. Buying up assets and key staff from startups and suppliers -- or acquiring whole companies to bring supply lines, or promising new technology, in house -- isn't unusual in the tech industry.

Still, the Dialog deal stands out. Apple's largest-ever acquisition -- a $3 billion deal in 2014 for Beats Electronics -- included the addition of about 700 people.

The talent acquisition comes as the performance of the processors Apple is designing for its iPhones are outpacing technology advances related to the batteries commonly used in iPhones, according to chip experts. The rate of processor development has made preserving power more critical in the devices.

Apple has been using Dialog chips to manage the battery life of its iPhones for years. It began adding its own power-management semiconductor experts more recently and has increasingly designed chips that work alongside Dialog's components to optimize power, according to a person familiar with the matter.

The iPhone maker's push into power management chip design has cut into Dialog's business. The company counted on Apple for about 70% to 80% of its revenue, or about $3 an iPhone, until Apple began developing some of its own power-management chips, according to UBS. The European chipmaker's shares tumbled earlier this year when the company disclosed Apple was adding a second power-management chip supplier.

Dialog said early Thursday that Apple has also given the supplier new contracts for the development and supply of power-management, audio subsytems, charging and other mixed-signal integrated circuits for Apple's products.

Revenue from these contracts is expected to be realized from 2019 onward, before accelerating in 2020 and 2021, the company said. Dialog's shares soared more than 30% in early European trading Thursday.

"Our relationship with Dialog goes all the way back to the early iPhones, and we look forward to continuing this longstanding relationship with them," said Johny Srouji, Apple's senior vice president of hardware technologies.

Jalal Bagherli, chief executive of Dialog, said the transaction "reaffirms our longstanding relationship with Apple."

Dialog said it plans to use the proceeds from the deal to accelerate investments in growth opportunities, including mergers and acquisitions. The deal is expected to be concluded in the first half of 2019, Dialog said.

Write to Tripp Mickle at Tripp.Mickle@wsj.com

 

(END) Dow Jones Newswires

October 11, 2018 05:02 ET (09:02 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.

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