Smartphone boost for CSR and Wolfson

UK semiconductor companies CSR and Wolfson both beat expectations for first-quarter sales on Wednesday, as their chips won spots inside a range of new smartphones designed to compete with Apple’s iPhone.

CSR, which has dominated the market for Bluetooth chips said it had won its first Wi-fi chip deal with a leading handset maker, and added a new GPS customer. The company more than doubled sales and returned to a profit in the first three months of the year.

CSR Q1 results
SalesPre-tax profitEarnings per shareDividend

At Wolfson, which makes audio chips, losses widened, but Mike Hickey, chief executive, hinted that the company could return to the black by the end of the year. Sales rose 13 per cent.

Wolfson Q1 results
SalesPre-tax profitEarnings per shareDividend

The results follow strong results last week from Broadcom and Texas Instruments, showing that demand across the chip industry is improving.

Neither CSR nor Wolfson chips have featured in Apple’s new iPhone or iPad, but they are winning business with Apple’s competitors, such as Samsung and LG. Samsung has said it aims to treble smartphone shipments this year, while LG intends to launch about 10 phones based on the Android operating system.

Wolfson, which provides the audio chips for Samsung’s Wave phone, for example, said it its chips had been selected for a leading manufacturer’s new Windows Mobile phone, as well as in another leading smartphone manufacturer.

Such deals are starting to help Wolfson make up for the loss of Apple as its biggest customer last year. The company announced a raft of 250 design wins last year, which are now beginning to translate into revenues. It had another 90 design wins in the first quarter.

“As more of these design-ins reach full production during the year, we expect our revenues to increase, leaving us well placed to return to sustainable profitability,” Mr Hickey said.

Sales rose 13 per cent to $28.5m, ahead of market expectations of $25.7m. Pre-tax losses widened to $6.9m from $4.7m last time. Mr Hickey said revenues in the second quarter would be in the range of $30m to $35m.

At CSR, sales more than doubled to $173m, at the top end of expectations, and the company returned to a profit of $4.4m, compared with a $22.6m loss last year. CSR forecast a sequential increase in revenue this quarter to between $210m and $225m, ahead of market consensus.

Confidence in CSR was dented recently by revelations that, like Wolfson, the company’s chips were not included in the Apple iPad tablet computer, although Apple has never been a big customer for the company. CSR is also suffering from the fact that Nokia, a key customer that the company has recently won back, has delayed the launch of its range of new smartphones.

However demand from emerging markets – with the GPS chips included in smartphones such as the Ophone in China – are helping to offset these effects.

“We are no longer dependent on a single technology or one customer,” said Joep van Beurden, chief executive. “The growth of GPS, demand from the Bric countries, growth of demand from the automotive sector, together these all give confidence. We are firing on all cylinders now.”

Shares in CSR, which have risen more than 60 per cent in the past year, rose 3.57 per cent to 435p in early trade.

Shares in Wolfson, which have risen around 45 per cent in the last three months, fell 2.5 per cent to 165.5p.

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