By Reuters
April 11, 2017

Shares in another European chipmaker plunged Tuesday over fears that Apple may drop it as a supplier.

Anglo-German chipmaker Dialog Semiconductor (dlgnf) risks losing a crucial supply deal with Apple Inc (aapl), according to German investment bank Bankhaus Lampe, whose analyst cut his rating on the stock Tuesday from “hold” to “sell”. That sent its share down by as much as one-third.

Apple, which accounted for more than 70 percent of Dialog’s 2016 sales by Lampe’s estimates, is working on its own battery-saving chip for the iPhone that could replace Dialog’s power management integrated circuits (PMIC) as early as 2019.

Read: Apple Announcement Causes Imagination Tech Shares to Crash More Than 70%

Shares in Dialog fell as much as 36 percent to a seven-month low. They recovered around half of that in later trading.

The downgrade comes after U.K.-based Imagination Technologies was advised by Apple that it planned to replace Imagination’s graphics chip designs in upcoming products, sending shudders through Apple’s global component supply chain. Imagination shares plunged 70% last week.

Bankhaus Lampe cited unnamed industry sources as saying that Apple is setting up power management design centers both in Munich and California and added that Apple already has around 80 engineers working on a power management chip of its own.

Read: Qualcomm Blasts Apple Over Alleged Chip Manipulations

“In our view, there is strong evidence that Apple is developing its own PMIC and intends to replace the chip made by Dialog at least in part,” Bankhaus Lampe analyst Karsten Iltgen advised investors.

A source familiar with the matter confirmed that Apple was recruiting top Dialog engineers in Munich. “They are poaching like crazy,” the person said.

A Dialog spokesman declined to comment. He added that the company is not planning to release any official statement.

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Lampe’s 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.

Dialog has made several failed attempts to diversify beyond Apple and other smartphone customers in recent years.

In 2014, merger talks between Dialog and Austrian sensor chip maker Ams AG fell apart after they failed to come to terms. Its plans to buy U.S.-based Atmel in 2015 were derailed after Microchip swooped in with a higher bid.

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