Chips hot as iPod sales soar

UK chip manufacturer Wolfson has upped its profits forecast, thanks to a booming consumer gadget market

The explosion in popularity of consumer electronics goods has led Scottish chip manufacturer Wolfson to forecast higher profits this year.

Wolfson reported on Monday that it now expects its second half revenues to be in excess of $90m ), compared to a current market consensus of approximately $79m (£51m compared to£45m). This is due to "accelerated demand for portable products", according to the company.

Wolfson produces mixed-signal semiconductors for the digital consumer electronics market, including chips for the iPod and Sony's PSP. The chips change digital signals to analogue, so are vital components of electronics goods such as digital music players and mobile phones.

Wolfson based its revenue growth predictions on a record backlog of orders for its chips.

"We entered the second half of the year with a record order backlog which has translated into good revenue growth in the third quarter. The backlog has continued to increase, with stronger demand for our products from a range of customers giving a strong finish to 2005." said David Milne, chief executive of Wolfson, in a statement.

Apple launched the iPod nano in early September, and a revamped, video-capable iPod was launched in mid-October, both of which use Wolfson chips. Analysts at UBS Investment Research have forecast that total iPod sales could top 10 million in the fourth quarter of this year. Wolfson also counts Samsung and Sharp among its customers.

Wolfson's predictions contrast strongly with fears that Scotland has no future as a centre for computer chip manufacturing.

Ron Leckie, president of US-based Infrastructure Advisors — a chip industry consultancy — said earlier this month that Scotland should concentrate instead on design work and start-up companies.

"The chances of leading edge semiconductor manufacturing coming back to Scotland are diminishing. Most mainstream chip manufacturing is migrating to Asia. China, in particular, is the new entrant," said Leckie, according to The Scotsman.