Apple Dialog deal includes $300 million in cash for the transaction itself and prepaying another $300 million for chip supply over the next three years

Apple has agreed to pay $600 million to buy parts of Dialog Semiconductor, an Anglo-German supplier of power management chips and technologies. The move hints at Apple’s further custom semiconductor efforts in areas like power management and charging. Under the terms of the agreement, Apple is getting Dialog’s patents, a team of about 300 engineers representing sixteen percent of Dialog’s workforce and the company’s offices in Europe.

Dialog’s shares rose by 34 percent in Frankfurt early on Thursday, their highest since 2002.

TAKEAWAYS:

  • Apple will license power management technology from Dialog Semiconductors.
  • It’ll pay $300M upfront and $300M in purchase obligations over the next three years.
  • Apple is also getting Dialog’s offices in the UK, Italy and Germany.
  • Dialog designs power-management chip used in iPhone, iPad and Apple Watch.
  • Apple is Dialog’s top customer.

The deal should close in the first half of 2019, subject to regulator approvals.

Offices and talent

The licensing agreement will also give Apple Dialog’s offices in Livorno, Italy; Swindon, the United Kingdom; Nabern and Neuaubing, Germany. The iPhone maker currently operates chip-design centers in Munich, Germany and St Albans in the United Kingdom.

Apple Dialog deal - a teardown image showing the location of Dialog's power-management chips on the iPhone XS logic board

Dialog’s power-management chips on the iPhone XS logic board

About 300 Dialog engineers, most of whom already worked on power-management chips for Apple devices, will stay in Europe and report to Apple’s Senior Vice President of Hardware Technologies, Johny Srouji, who also leads Apple’s internal silicon teams.

Apple’s semiconductor chief comments

He also told TechCrunch:

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. 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.

Since the original iPhone, Apple has used Dialog’s technology to power-manage its mobile devices like iPhone, iPad and Apple Watch. After the deal, Apple should account for 35-40 percent of Dialog’s total revenues in 2022, down from around 75 percent in the current year.

Headcount will fall to 1,800.

Dialog secures its role as an Apple supplier

The sizable deal certainly cements Dialog’s role as a supplier to Apple after its stock got hammered earlier this year on rumors that Apple would start designing its own power-management chips for iOS devices. Dialog CEO Jalal Bagherli said in March that Apple had commissioned it “with the design of chips for many devices for 2019 and 2020.”

Apple Dialog deal indicates Apple will eventually design its own iPhone power-management chips from scratch

Apple’s largest acquisition to date is the $3 billion Beats deal.

It typically buys smaller startups from time to time, but this sizable deal isn’t one of those acquisitions. For context, the Cupertino firm in 2013 acquired Israeli smart sensor maker PrimeSense for $350 million. A year earlier, Tim Cook & Co. coughed up $356 million to snap up another Israeli startup, AuthenTec, whose technology would form the basis for the Touch ID fingerprint scanning technology built into the iPhone’s Home button.

iPhone XS teardown images courtesy of iFixit.com