Apple has agreed to buy a portion of chip supplier Dialog Semiconductor's business in a $600 million (€518 million) deal, the two companies said on Thursday, expanding the iPhone maker's chip operations in Europe.
Since the first iPhones a decade ago, Apple has used Dialog power-management chips to manage their battery life. Under the deal, Apple is buying patents, a team of about 300 engineers, most of whom already worked on chips for Apple devices, and Dialog offices in Britain, Italy and Germany.
Dialog said its 2018 revenue would not be affected and it would continue shipments of existing products to Apple.
For now, the deal settles questions about future relations between Apple and Dialog, whose shares tumbled this year when it said Apple planned to use chips from another supplier, which was widely believed to be Apple itself.
Dialog’s shares rose 17 per cent in pre-market trading in Frankfurt, as the Apple deal secured their business relationship for the next three years.
The Anglo-German chipmaker also said it would begin a share buyback programme for up to 10 per cent of its stock following its next quarterly trading update.
Struggled
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 investment fund last year after losing Apple as a client.
Half of the deal’s value, or about $300 million (€259 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.
"This transaction reaffirms our long-standing relationship with Apple, and demonstrates the value of the strong business and technologies we have built at Dialog," Dialog CEO Jalal Bagherli said in Dialog's statement.
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.
Expertise
Apple is buying about 16 per cent 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.
“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,” Mr Srouji said.
“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.?
Apple has added around 20,000 employees in Europe since 2000. It already has a chip design centres 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.
The transaction is expected to close in the first half of 2019, subject to customary closings and regulator approvals, Dialog said.
– Reuters
