Tech Transformers

Apple supplier tanks 36% amid fears it could lose its key contract

Bankhaus Lampe: Dialog’s business model highly valuable long term

Shares of Anglo-German manufacturer Dialog Semiconductor lost more than a third of their value on Tuesday morning after a financial analyst warned the company may lose a contract with the U.S. tech giant Apple.

Bankhaus Lampe, a private bank in Germany, downgraded the manufacturer to a "sell" rating on "strong evidence" that Apple is working on its own battery-saving chip for the iPhone - which could replace Dialog's power circuits as early as 2019.

Karsten Iltgen, analyst at Bankhaus Lampe and author of the research note that moved the stock, told CNBC: "I'm certainly not enjoying the sell-off in the stock this morning, I just thought it was my duty really to publish what I found out in my research."

"It could be quite alarming for the company in the medium term at least," he said about Apple's move to develop its own power management integrated circuits.

"I'm describing in the note that from 2019 onwards this could have a significant impact on earnings," Iltgen said, adding that there's a lot of uncertainty around the exact numbers because it will all depend on how much Apple is going to produce internally.

Earlier this month, the shares of Imagination Technologies, a U.K. chip designer, sank more than 60 percent after Apple said it would cease a contract to use its products.

"We believe that Apple is setting up power management design centres in Munich and California," Iltgen said in his note to investors. "We hear from the industry that about 80 engineers at Apple are already working on a PMIC (power management integrated circuits) with specific plans to employ it in the iPhone by as early as 2019."

But Morgan Stanley and Bank of America-Merill Lynch cast doubts on Iltgen's analysis.

According to Reuters, BoA-Merrill Lynch suggests a recent engineering hiring spree at Apple could be explained by the need to develop other products, such as cars, entertainment systems and existing phones. Morgan Stanley believes Dialog entered into a partnership with Apple to design a wireless charging system.

Iltgen is a four-star rated analyst for the accuracy of his earnings estimates on Dialog and ranks sixth among 16 analysts covering the stock, according to Thomson Reuters data.

The company's stock sank 36 percent at the start of trading. At the close in Frankfurt, Dialog regained some ground but still finished the day down more than 14 percent at 40.91 euros.

Dialog Semiconductor and Apple were not immediately available for comment when contacted by CNBC.

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