Wolfson cashes in as shoppers keep taking tablets

Pixie Lott launches the BlackBerry Z10 smartphone. Picture: Getty
Pixie Lott launches the BlackBerry Z10 smartphone. Picture: Getty
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A SURGE in demand for tablet computers in the run-up to Christmas is expected to trigger bumper fourth-quarter results this week for one of Scotland’s highest-profile technology companies.

Audio chips made by Wolfson Microelectronics, which was spun out from Edinburgh University in 1984, are built into some of the most popular tablet brands, including Amazon’s Kindle Fire HD, Microsoft’s Surface and Samsung’s Galaxy Note.

Electrical retailer Dixon revealed last month that it sold five tablets every second in the week leading up to Christmas Day, with rival chain Argos also reporting a 125 per cent leap in its online sales, driven by demand for computers.

Industry sources have also revealed that Blackberry- maker Research in Motion (Rim) has included Wolfson’s chips in its Z10 smartphone, which was released last week as the Canadian firm goes head-to-head with Apple’s iPhone 5 and Samsung’s Galaxy S3, which also uses Wolfson components.

Under chief executive Mike Hickey, Wolfson has focused on audio chips and microphones instead of components for other products such as cameras and printers.

Analysts predict that mobile phones and tablets will have accounted for about 60 per cent of the company’s chip sales during 2012, up from 48 per cent in 2011 and just 30 per cent in 2010.

Wolfson has led the development of micro-electro-mechanical system (Mems) microphones, which deliver better sound quality than previous chips.

Smartphone makers have been adding more than one Mems microphone to their devices in order to cut down on background noise.

Alexandra Jarvis, an analyst at Peel Hunt, said: “Mems accounted for close to no sales in the second quarter, 3.5 per cent of third-quarter sales, an estimated 6-8 per cent in fourth-quarter sales and could be in excess of 10 per cent of 2013 sales.”

Liberum Capital analyst Eoin Lambe said: “The high end of the smartphone market is becoming a two-horse race, with Samsung and Apple starting to dominate.

“Wolfson is a key supplier to Samsung and its audio hubs are included in most of Samsung’s high-end smartphones and tablets. Samsung is expected to account for circa 40 per cent of Wolfson’s revenue in the fourth quarter.”

Lambe added: “Wolfson recently re-engaged with Apple, and its digital-analogue converter chip was included in Apple’s iPhone adaptor.

“While this design win is likely to be small from a revenue perspective, circa $15 million (£9.5m), it opens the door for Wolfson to regain more meaningful share at Apple.

“It is unlikely Wolfson would take share from Cirrus in Apple’s iPhone or iPad, with further design wins for Wolfson more likely in PCs or Apple’s potential TV.”

Wolfson had been dropped by iPod maker Apple in 2008 after missing deadlines for producing components.

The relationship between the two companies had previously been hailed as one of the defining characteristics in building up Wolfson’s reputation within the industry.