The Anglo-German chipmaker Dialog Semiconductor reported record quarterly revenue of $463 million, beating its most optimistic forecast by $8 million. That’s plenty of cash, but unfortunately for Dialog, much of it depended on its biggest customer, Apple.
Apple has a fraught recent history with its suppliers. The might of the iPhone maker means that while suppliers can do extraordinarily well filling its orders, it can also crush links in its supply chain with impunity. That’s what happened to British chip designer Imagination Technologies last year: The firm was sold 81 days after Apple announced it no longer needed its designs.
Dialog is facing the same pressures as Imagination. An analyst at the private bank Bankhaus Lampe warned in April that there was “strong evidence” Apple was designing its own power-management integrated circuits—the components it currently buys from Dialog. The stock duly fell.
Then, in December, the rumors that Apple would drop Dialog as a supplier grew louder, and the stock plummeted by over 40%. The chipmaker had to issue a statement confirming that Apple was indeed its biggest customer and that it could withdraw its business in the future, although that wasn’t likely to in 2018. The fate of the company for 2019, however, would be decided by negotiations this quarter.
For Dialog, those talks with Apple can’t come soon enough. But there’s a good chance that it will sound a lot more like a monolog delivered by the Cupertino, California giant.