The company now depends on the U.K.'s Dialog Semiconductor, which lost 19% stock value in afternoon trade as a result.
Dialog supplies power management chips for Apple's iPhones, iPads and watches which accounts for three-quarters of its revenues a year ago.
Dialog Semiconductor is now the only supplier of power management chips for the iPhone, and the company on Monday confirmed that Apple does indeed have the capability of designing its own silicon to handle various power-related aspects on iPhones.
Dialog Semiconductor slumped to the bottom of the Stoxx 600 on Monday morning after admitting that its biggest customer Apple could be about to design its own chips.
"Our position remains that we have seen no material change to our ongoing relationship with Apple Inc", Chief Executive Jalal Bagherli told investors on a conference call, Reuters reports. The company is believed to derive the majority of its income from Apple.
Investors have become wary of businesses that rely too much on Apple, which has eliminated several of the small suppliers during the past.
Francois Meunier, an analyst at Morgan Stanley, said the market has already priced in a partial or full loss of the Apple contract but the iPhone maker could be working to help its suppliers. However, Dialog does not expect this to impact its business in 2018.
In mid-morning European trade, shares in the Anglo-German firm were more than 18 percent lower. "Dialog management is aware that they need, more than ever, to deliver a chip that is competitive on features, price and timing", he said.
Commerzbank set a €58.00 ($69.05) price objective on Dialog Semiconductor (ETR:DLG) in a research note released on Friday morning.