Apple is set to buy German-listed Dialog Semiconductor in a $600 million deal as part of the strategy to ensure the availability of the power-management technology that is at the heart of its iPhones.
The deal to acquire patents and people from the Anglo-German chip designer is the largest for Apple. Apple has purchased Face ID creator PrimeSense in 2013 in a deal valued at $350 million, Reuters reported.
Apple is buying patents, a 300-strong engineering team who have already worked on chips for Apple devices, and Dialog offices in Britain, Italy and Germany.
Apple has used Dialog power-management chips to extend their battery life since the first iPhones a decade ago.
Dialog CEO Jalal Bagherli said the company seeks new opportunities in areas such as the Internet of Things that includes connected devices like home speakers, fitness trackers or smart watches.
Apple expects to account for three-quarters of this year’s sales. Dialog said its 2018 revenue would not be affected and it would continue shipments of existing main power management integrated circuits (PMICs) to Apple. It expects to sell current and future generations of so-called sub-PMICs to Apple.
After the deal, Dialog expects Apple to account for 35-40 percent of its total revenues in 2022. That is down from around 75 percent in the current year. Headcount will fall to 1,800.
Other chip designers in Europe have struggled to manage their relationship with Apple due to its sheer scale. Britain’s Imagination Technologies ended up being sold to a Chinese-backed fund last year after losing Apple as a client.
Half of the deal’s value, or about $300 million, is cash for the Dialog engineers and offices and the other $300 million is pre-payment to Dialog for supplying chips over the next three years, the companies said.
Dialog said it would continue to deliver chips to other customers, focusing on the automotive and internet-of-things markets, among others.
Dialog said it expects annual operational savings of $35 million from the deal.
It forecast that its sub-PMIC business would achieve compound annual growth rates of 30-35 percent between 2018 and 2022. Its AMS, Connectivity and Automotive & Industrial business would grow at a 10-15 percent rate.
The deal represents an expansion of Apple’s chip design operations, which kicked into high gear in 2010 when the company released its first custom processor for the iPad and iPhone.
Apple is buying about 16 percent of Dialog’s workforce. Apple said these employees would stay in Europe and would report to Johny Srouji, the company’s senior vice president of hardware technologies who oversees Apple’s chip design efforts.
Apple has added around 20,000 employees in Europe since 2000. It already has a chip design centers in Munich, Germany, where it employs 1,000 staff, and St Albans, Britain. The deal will give Apple four more from Dialog, in Livorno in Italy, Swindon in Britain, and Nabern and Neuaubing in Germany.
