* Dialog says companies could not agree on terms
* Says remains committed to exploring strategic moves
* AMS confirms does not intend to make a takeover offer
* Dialog shares turn positive in early trade (Adds AMS, analyst comments, updated share prices)
FRANKFURT/VIENNA, July 22 (Reuters) - Talks for Austrian chipmaker AMS to buy German peer Dialog Semiconductor have collapsed, with the two firms blaming differences over price and future strategy.
Dialog and AMS said last month they were in "very preliminary" talks over a deal that could have created a European chipmaker with a market value of about $4.7 billion, and potentially a stronger business to tap the burgeoning market for web-connected devices.
AMS makes electronic sensors, which can measure everything from air pollution to the human heartbeat, while Dialog's chips manage power consumption. Both firms supply chips to Apple for iPhones and iPads.
"We had detailed discussions over the period after the first announcement but in the end there wasn't a common understanding," a spokesman for AMS said on Tuesday.
"Terms and valuation played a role but also the strategic direction going forward," he said, declining to elaborate.
The chipmaking industry is seeing a wave of deals as firms look for alternatives to saturated mobile phone markets.
Last month, Analog Devices Inc said it would buy Hittite Microwave Corp in a deal valued at $2 billion and Cirrus Logic Inc said it would buy Wolfson Microelectronics Plc for an agreed 291 million pounds ($497 million) in cash.
DZ Bank analyst Harald Schnitzer said he believed the sticking point was the valuation of Dialog, keeping his "buy" recommendation on the German company's stock.
"Dialog seems to see itself more valuable compared to AMS since its expected growth rates are quite high and Dialog has a more flexible fabless business model, which has some advantages compared to AMS, which owns production facilities," he added.
Dialog trades at 17.7 times estimated 12-month forward earnings, according to Thomson Reuters data, at a premium to AMS's multiple of 15.4.
Shares in Dialog, which have more than doubled in value over the past year, erased early losses on Tuesday, trading 0.8 percent higher at 23 euros by 0755 GMT. Switzerland-listed AMS was 0.7 percent higher at 143.40 Swiss francs, in line with the European technology index.
Dialog said it would now focus on its strategy of becoming a leading provider of analogue mixed signal semiconductors for fast-growing markets including smartphones, tablets, solid state lighting as well as the wearable and smart home segments.
"With the end of these discussions, it is business as usual, namely delivering increasing value for our shareholders," Dialog Chief Executive Jalal Bagherli said in a statement.
Nonetheless, the company said it remained committed to exploring strategic moves to beef up its product portfolio and expand its market.
"Given its financial strength and FCF (free cash flow) generation capacity, we are convinced Dialog will acquire a different sensor asset next year," Kepler Cheuvreux analyst Bernd Laux said, also sticking with a "buy" recommendation.
AMS said it would concentrate on its own business. "It was an interesting opportunity but it's not top of our agenda that we have to do any more transactions," the spokesman said.
($1 = 0.5856 British Pounds) (Editing by Louise Heavens and Mark Potter)