Apple secures three-year chip supply
Apple (AAPL) recently landed a wide-ranging deal with British chip designer Dialog Semiconductor (DLGNF). Dialog makes power management chips that help prolong battery life. Apple has used Dialog power chips in iPhones since it introduced the product more than a decade ago. The iPhone accounts for the majority of Apple’s revenues. Let’s see what the Apple-Dialog deal includes.
Apple is acquiring a team of about 300 engineers from Dialog. They are experts who have been involved in designing chips for Apple products. Apple is also buying a portfolio of patents from Dialog. The iPhone maker is also paying $300 million to take over the Dialog offices in the United Kingdom, Italy, and Germany.
For another $300 million, Apple has secured chip supplies from Dialog for the next three years. The Dialog deal is valued at $600 million.
The transfer of employees that is about to take place between Apple and Dialog isn’t unusual. Verizon (VZ), a leading American mobile operator and one of the distributors of Apple products, is in the process of transferring thousands of its employees to India-based Infosys (INFY) as part of a $700 million information technology outsourcing deal.
Managing relationships with suppliers
Apple’s deal with Dialog could cement the longstanding relationship between the two companies. But it comes at a time when Apple is entangled in a bitter dispute with its one-time prominent supplier Qualcomm (QCOM). Apple and Qualcomm have sued and countersued each other in several jurisdictions over disagreements on patent licensing terms.