Dialog Semiconductor PLC (ETR:DLG) shares are trading down sharply on Tuesday after a brokerage downgraded it to a Sell rating. The reason is very simple there is a threat it could a supplier contract with Apple Inc. (NASDAQ:AAPL). The fears heightened after the American company ditched Imagination Technologies Group plc (LON:IMG) only a little more than a week ago.
Dialog Semiconductor is one of the companies that depends largely on Apple as the company’s got over 70 percent of its total revenue from the iPhone maker. This is much similar to the situation that Imagination Technologies faced on April 3 when the tech bellwether indicated that it might not be using the London company’s graphic technology and gave a 15-month time.
Reuters reported that Bankhaus Lampe downgraded its citing that the iPhone maker is working on its own chip, which is a battery-saving one. The analyst believes that could replace the German firm’s power management integrated circuits probably in 2019. He also reported pointed out industry sources to back his claim.
It would not come as a surprise since Apple has been making its own parts for different things. For instance, the iPhone maker is working on making graphic technologies in-house and dumped Imagination Technologies. The company is said to be poaching Dialog employees in Munich.
One of the main problems that both Dialog and Imagination Technologies faced is that both have failed to expand beyond delivering what Apple wanted. Though reports suggested that the two companies tried to expand, they did not translate into any significant transformation or alternative revenue generator for both.
There is already a clamor that Apple should think of buying Imagination Technologies since its valuation lost about 60 percent after the news broke out. Similarly, a clamor for acquiring Dialog Semiconductor could also grow in the coming days. However, Apple is not likely to be interested since they would have invested money for working on such technologies in-house.
At time of writing this, Dialog Semiconductor shares are trading down 18.5 percent though at one point in time, the stock suffered a drop of about 25 percent.