Dialog Semiconductor is finding out what happens when you put most of your eggs (or apples, perhaps) in one basket.
Shares in the British-German tech company plunged 23% on Monday, after it acknowledged that Apple ( — by far its biggest customer — can now develop the power management chips Dialog produces. )
Dialog shares had already slumped in April on fears that Apple could drop the company as a supplier, and Monday’s crash took the stock’s losses this year to more than 40%.
The company has previously tried to play down those concerns. Monday was the first time it has publicly acknowledged Apple could eventually replace its chips with in-house production.
“Dialog recognizes Apple has the resources and capability to internally design a [power management integrated circuit] and could potentially do so in the next few years,” the company said in a statement.
A lot is at stake. Apple accounted for 74% of Dialog’s sales in 2016, according to the company’s annual report.
“This is a major disaster,” said Tim Wunderlich, analyst at Hauck & Aufhauser.
“I would expect Dialog to experience declining sales from 2019 onward, intensifying gross margin pressure, (and) brain drain as uncertainties make the company a far less appealing employer for top talent,” he added.
The Nikkei Asian Review reported last week that Apple could start using its own power management chips as early as next year.
Dialog said it had no information to suggest Apple was getting ready to start making its own chips that soon.
It is working with Apple on plans for 2019 products, and will have a better idea about its future contracts with Apple by March, the company added.
Apple did not respond to a request for comment.
Another company, Imagination Technologies, ( saw its stock drop more than 70% in April, after Apple said it was planning to stop licensing the firm’s technology in about two years. )
Imagination has since been sold to China-backed Canyon Bridge Capital Partners for £550 million ($740 million), well below the £2 billion ($2.7 billion) it was worth at its peak in 2012.
CNNMoney (London) First published December 4, 2017: 11:27 AM ET