A long line of companies have lost revenues and killed product lines over the years, when Apple decided to go inhouse for components such as the graphics processor and central processor. Those decisions saw Imagination Technologies broken up and sold, and even Samsung losing an apps processor customer. In the case of Dialog, Apple bought the firm’s battery management assets and expertise in a $600m deal last year, pushing the company to redouble its efforts to grow its Industrial IoT business.
In pursuit of this goal, Dialog has acquired Creative Chips for $80, just four times its expected revenue for 2019, which indicates how the air has gone out of the IoT valuations balloon recently.
This deal is part of another trend – a sustained period of consolidation in the semiconductor market, where the big firms have been buying smaller specialists to address gaps in their portfolios, and where multi-billion-dollar deals are not at all uncommon.
Dialog is on an acquisition spree to fill the gap left by Apple. It paid $45m for Silicon Motion’s wireless communications arm, under the brand FCI, back in March, looking to acquire the low-power WiFi assets to flesh out its IoT offerings. In October 2017, it paid $306m for Silego and its configurable mixed-signal integrated circuit (CMIC) portfolio, again to boost its IoT expertise.
With Creative Chips, the focus is on pushing its portfolio to IIoT customers, as industrial operations begin to accommodate connected appliances and devices. Headquartered in Germany, Creative Chips is close to the likes of Bosch, Siemens, and the supporting ecosystems, which should provide a nice set of business leads for Dialog to leverage.
Dialog is hoping to become a very valuable supplier of custom-designed chips to these firms, and says that with the deal it has acquired an “impressive set of top-tier industrial customers that have been built over the course of nearly 20 years”.
As for the available financials, Dialog says Creative Chips is expected to generate $20m in 2019, and post 25% revenue growth over the next few years. In addition to the $80m cash being paid, Dialog has also floated $23m depending on 2020 and 2021 revenue targets being met.
“The acquisition of Creative Chips is instrumental for Dialog, giving it a strong foothold in the Industrial IoT market, while still highly complementary to Dialog’s current mixed-signal business,” said CEO Jalal Bagherli. “The addition of Creative Chips and its team of highly experienced and talented engineers will help to further diversify Dialog’s product revenues, customer base and end markets by extending our reach in the industrial sector in addition to strengthening our automotive offering. We look forward to welcoming the whole team to Dialog.”