* Bankhaus Lampe cuts rating on risk of losing Apple deal
* Broker estimates Apple accounts for 70 pct of Dialog sales
* Other suppliers under scrutiny on Apple in-sourcing risks
* Dialog shares fall as much as a third to seven-month low
(Adds additional analyst comment; other stock impacts)
By Eric Auchard and Harro Ten Wolde
FRANKFURT, April 11 Dialog Semiconductor
risks losing a crucial supply deal with Apple Inc
, according to a financial analyst who cut his rating on
the stock on Tuesday, sending the Anglo-German chipmaker's
shares down by as much as one-third.
Bankhaus Lampe reduced its rating on Dialog to "sell" from
"hold" as it argued that Apple was working on its own
battery-saving chip for the iPhone that could replace Dialog's
power management integrated circuits (PMIC) as early as 2019.
Apple accounted for more than 70 percent of Dialog's 2016
sales, analysts estimate. The German company says it is the
world's top maker of power management chips used in smartphones
with roughly 20 percent of the market.
Shares in Dialog fell as much as 36 percent on Tuesday to a
seven-month low. They had more than doubled in the second half
of 2016 on rising expectations for the iPhone 8 due out later in
2017. By 1052 GMT, they had pared losses by half to trade down
19 percent at 37.70 euros ($38.87).
Apple's suppliers are in the spotlight after Imagination
Technologies last week revealed Apple's plans to replace
its graphics chips with parts it is developing in-house, sending
shudders through Apple's global supply chain.
Imagination's stock plunged 70 percent.
Bankhaus Lampe cited unnamed industry sources as saying that
Apple was setting up power management design centres both in
Munich and California and said Apple already had around 80
engineers working on a power management chip of its own.
"In our view, there is strong evidence that Apple is
developing its own PMIC and intends to replace the chip made by
Dialog at least in part," Bankhaus Lampe analyst Karsten Iltgen
said, referring to power management chips.
Lampe's Iltgen is a four-star rated analyst for the accuracy
of his earnings estimates on Dialog and ranks sixth among 16
analysts covering the stock, according to Thomson Reuters data.
A source familiar with the matter confirmed that Apple was
recruiting top Dialog engineers in Munich. "They are poaching
like crazy," the person said.
A Dialog spokesman declined to comment. He also said Dialog
was not planning any official statement.
Apple did not immediately respond to a Reuters' request to
A trader with brokerage Exane, who said he had been in
contact with Dialog management, said investors were overreacting
to speculation that Dialog might lose Apple's business.
He said Dialog has completed designs for chips that Apple
plans to use in 2017 and 2018 iPhone models while it continues
to discuss with Apple using its parts in 2019 phones.
The trader also said Apple would need to hire more than
1,000 engineers to completely replace the power management chips
supplied by Dialog.
The downside of winning Apple as a customer is that smaller
suppliers can become highly dependent on its business due to the
huge sales volumes generated by new iPhone contracts.
Dialog has made several attempts to diversify beyond Apple
and other smartphone customers in the past few years.
In 2014, merger talks between Dialog and Austrian sensor
chip maker Ams AG fell apart after they failed to come
to terms. Its plans to buy U.S.-based Atmel in 2015 were
derailed after Microchip swooped in with a higher bid.
Apple has outsourced production of its hardware products to
an extended network of suppliers, large and small, while it has
moved over the past decade to design its own central processors
and added functions like fingerprint recognition since then.
Over the past dozen years, Apple suppliers CSR,
PortalPlayer, Sigmatel and Wolfson have been replaced, pushing
them eventually to merge with more diversified players.
But Apple continues to rely on key suppliers to develop
innovations ranging from image and motion sensors to power
Other chip suppliers for the current iPhone 7 include, but
are not limited to, Cirrus Logic, NXP,
Qualcomm, Skyworks, STMicroelectronics
, according to an analysis by TechInsights in September.
Shares in highly diversified chipmaker STMicro, which
analysts believe supplies light sensors for iPhones, fell 2.5
percent, weighing on the benchmark STOXX Europe 600 Technology
index, which was down 1 percent.
($1 = 0.9419 euros)
(Editing by Jason Neely and Jane Merriman)