After the collapse of Dialog Semiconductor following a report on the potential loss of major customer Apple, the ghosts broke on Friday at the analysts. While Bankhaus Lampe’s cautious stance on the stock was confirmed and continued to sell, Commerzbank relied on a dialogue spokesman’s statement that Apple’s business was normal and stuck to its buy recommendation.
Apple wants to produce according to the Japanese business paper “Nikkei” future chips for the iPhone on its own. The newspaper had called on Thursday to unnamed industrial circles. The development of the new computer chips should start at the beginning of 2018. Apple wants to reduce the dependence on dialogue. As a result, the shares of Dialog Semiconductor had fallen by around 18 percent to just over 30 euros the day before. On Friday they recovered a little from it.
Bankhaus Lampe’s Karsten Iltgen rated the “Nikkei” report as the “first independent confirmation” of his thesis that Apple internally created a second source for components for the iPhone. These components could be used for the first time in 2019 in iPhones, but possibly even as early as 2018. Apple’s plans have been an “open secret” in the industry. Not only Apple and Dialog, but also suppliers like TSMC and competitors like Cirrus Logic are familiar with the situation.
Commerzbank’s Thomas Becker, on the other hand, trusts the statements of the management of Dialog, according to which 2018 should be a year of good growth. “That would be difficult to do if they lose Apple as a customer,” the analyst wrote. Anyway, he wonders how Apple should succeed in replacing Dialog with its ten years of experience in the production of chips for energy management. The approximately 700 developers at Dialog would face only about 60 on the part of Apple – of which, however, about half were formerly in Dialog.
Lampe analyst Iltgen estimated after discussions with suppliers of the industry the probability that Apple will use their own components in iPhones already in the coming year, on “under 50 per cent”. More likely, however, is the year 2019. Then an estimated 30 percent of the corresponding components could be manufactured by Apple itself. This in turn could shrink Dialog’s profits by 10 percent annually. A decision will probably fall in the first quarter of 2018.
Commerzbank expert Becker referred to the costs. Thus, the components supplied by Dialog accounted for only 2.5 percent of the total material costs of the Apple devices. As long as Dialog complies with the technical specifications, its replacement by Apple itself is unlikely. This also applies to the iPhones produced in 2019. Like Iltgen, Becker expects a decision early next year.
Becker sees a major risk for dialogue in the fact that Apple is developing a fundamentally new technical platform for iPhones, in which Dialog Semiconductor is no longer in the boat. But that would surprise him, ordering Apple for 2019 currently more in dialogue and no less.
Beckers’ price target of 58 euros gives the Dialog share an impressive 85 percent upside potential after the price slump of the previous day. Accordingly, the rating is “Buy”. The price target of Lampe-Analyst Iltgen of 32 euros has fallen below the shares of Dialog meanwhile. “We see further downside potential for our estimates,” the expert wrote, should evidence of Apple’s plans thicken. The investment recommendation continues to sound “sell”