Smart Cities

Dialog Semiconductor Continues Shopping Spree with Another IoT Acquisition

Dialog Semiconductor has acquired Adesto for $500 million in a deal announced last week. This is the UK-based semiconductor manufacturer’s second Internet of Things (IoT) focused acquisition within four months. The deal signals the next stage in the company’s diversification away from its biggest customer, Apple, and into the smart building and smart cities space. In October 2019, Dialog announced the $80 million acquisition of German IIoT integrated circuit supplier, Creative Chips, additional consideration of $23 million may be paid based on revenues targets for the next two years. Both companies operate well-established fabless semiconductor business models with a focus on mixed-signal products and technology. However, the purchase immediately increased Dialog’s sales in the area of wireless low power connectivity, configurable mixed-signal, and power management integrated circuits. An area further enhanced by last week’s Adesto deal. “The strategic value [of the Adesto deal] is more in the industrial internet of things – smart buildings, smart […]

Stay ahead of the pack

with the latest independent smart building research and thought leadership.

Have an account? Login

Subscribe Now for just $200 per year per user (just $17 USD per month) for Access to Quality Independent Smart Building Research & Analysis!

What Exactly Do you Get?

  • Access to Website Articles and Notes. Unlimited Access to the Library of over 1,700 Articles Spanning 10 Years.
  • 10% discount on ALL Memoori Research reports for Subscribers! So if you only buy ONE report you will get your subscription fee back!
  • Industry-leading Analysis Every Week, Direct to your Inbox.
  • AND Cancel at any time
Subscribe Now

Dialog Semiconductor has acquired Adesto for $500 million in a deal announced last week. This is the UK-based semiconductor manufacturer’s second Internet of Things (IoT) focused acquisition within four months. The deal signals the next stage in the company’s diversification away from its biggest customer, Apple, and into the smart building and smart cities space.

In October 2019, Dialog announced the $80 million acquisition of German IIoT integrated circuit supplier, Creative Chips, additional consideration of $23 million may be paid based on revenues targets for the next two years. Both companies operate well-established fabless semiconductor business models with a focus on mixed-signal products and technology. However, the purchase immediately increased Dialog’s sales in the area of wireless low power connectivity, configurable mixed-signal, and power management integrated circuits. An area further enhanced by last week’s Adesto deal.

“The strategic value [of the Adesto deal] is more in the industrial internet of things – smart buildings, smart cities,” said Jalal Bagherli, CEO of Dialog. “Adesto’s established strength in connectivity solutions and highly optimized products for building and industrial automation perfectly complements and adds scale to our Industrial IoT portfolio from the recently acquired Creative Chips. Adesto’s deep customer relationships, comprehensive system expertise, and proprietary technology will deliver enhanced value for Dialog customers.”

Established in 1985, Dialog has become a leading provider of integrated circuits that power IoT and Industry 4.0 applications. In 2019, the company generated approximately $1.4 billion in revenue and has consistently been one of the fastest-growing European public semiconductor companies, currently employing 2,000 people worldwide. Dialog solutions are integral to some of today’s leading mobile devices, enabling power efficiency and shortening charging times for well-known products such as Fitbit, Garmin, and GoPro, and Apple iPhones.

Apple has long sourced power management integrated circuits (PMIC) products from Dialog. In 2017, the two companies signed a new and extensive licensing agreement where Apple prepaid $300 million for products to be delivered over the next three years. As part of the deal, Dialog also agreed to move over 300 of its employees (16% of its workforce) to Apple, in addition to allowing the tech-giant to assume control of their Dialog facilities in Livorno, Swindon, Nabern, and Neuaubing. Their 2017 annual report showed that about 77% of its sales came from Apple alone, creating a significant customer concentration risk.

While the company sought to diversify, a new $600 million deal with Apple in 2018 to hand over people and patents behind the main integrated power-management circuits in the iPhone maintained the concentration. A Dialog slide deck in October 2018 showed Apple making up 75% of sales that year but also stated the company’s ambitions to reduce that figure to 35% and 40% of its revenue by 2022. The recent deals with Creative Chips and Adesto are now being seen as steps on Dialog’s derisking process away from Apple and towards the new opportunities they see in the IoT.

In last week’s deal with Adesto, Dialog has agreed to pay $12.55 per share in a pure cash deal representing a 57% premium to Adesto’s closing price on Wednesday. Santa Clara based Adesto has approximately 270 employees and a portfolio of industrial solutions for smart building automation that would complement Dialog’s manufacturing automation products. Adesto’s solutions are sold across the industrial, consumer, medical and communications markets, opening up new channels for Dialog for its push into the IoT space.

The transaction is expected to close in the third quarter, subject to regulatory approvals and increase earnings in the combined group’s first calendar year, with cost annual savings seen at about $20 million. Adesto expects to report 2019 revenues of about $118 million and Bagherli expects it to continue to generate double-digit revenue growth year-on-year, as they grow new markets and maintain strong supply relationships with Apple and other major consumer electronics companies.

This acquisition of a smaller competitor is not unusual and many in the market had been expecting Dialog to spend its Apple money sooner rather than later, before its current contracts come to an end. However, the new direction for the semiconductor manufacturer into the IoT for smart buildings and smart cities is a more intriguing development for the market and the player.

This direction will bring high-quality and low-cost chips into the space and Dialog’s bold strategy underlines the strong potential growth in IoT and smart technology, increasing confidence in these emerging markets.

Most Popular Articles

Mobile Access Control Market Research
Security

What is the Key to Rapid Evolution in Access Control Technologies?

Until the late 20th century, people primarily relied on lock-and-key systems to control access in buildings. In the last 40 years, however, we have been introduced with new access control technologies that promise improved security and a range of features that elevate the occupant experience. From various versions of card and fob technology to QR […]

Napco AirAccess Access Control
Security

Napco Security Business & FY 2023 Financials Examined

In this Research Note, we examine NAPCO Security Technologies, Inc., a building security products manufacturer of alarms & connectivity, locking and access control solutions. This article focuses on NAPCO’s competitive strengths, fiscal 2023 financials, recurring service revenues and their long-term goals. The company has a significant security presence in commercial settings, with around 80% of […]

Energy

Siemens Buildings Business & FY 2023 Financials Examined

In this Research Note, we examine the Buildings business of Siemens, which operates within the Smart Infrastructure (SI) division, based on their Q4 earnings release and investor presentations of 16th November 2023. This article focuses on the latest financial results, revenue mix, recent Building X software/Xcelerator platform announcements and the outlook for FY 2024. Siemens […]

Subscribe to the Newsletter & get all our Articles & Research Delivered Straight to your Inbox.

Please enter a valid email

Please enter your name

Please enter company name

By signing up you agree to our privacy policy