A foothold in the Chinese smartphone market and the upgrading of audio quality across more consumer devices is likely to propel Wolfson Microelectronics back into profit this year.
The Edinburgh-based audio chip-maker, reporting first quarter numbers, said revenues were up almost 60% year-on-year to $48.1 million (£31m). The underlying operating loss was $2.8m against $6.4m the previous year, and the performance beat analysts' expectations.
The all-important gross margin reduced from 49% to 40.3% due to product mix, as previously guided, but Mike Hickey, chief executive, said: "The mix will improve as we go through this year, as we add more digital and software to our products."
Wolfson's audio hubs, the audio system on a chip, contributed 86% of revenue with mobile hubs growing more than 100% year-on-year. Sales into mobile phones grew more than 200%. Encouragingly, sales into home entertainment and digital still cameras grew more than 50% and almost 80% respectively on the back of customer product launches.
Mr Hickey said: "They are trying to get these products much smarter and more sexy, and doing more to spark consumer interest in them.
"Product cycles are getting shorter and shorter as they get new technology in."
Non-mobile devices were adopting smart mobile features using similar parts and software features, Mr Hickey said, adding: "We have got very good connections with all of these customers because they tend to participate across the spectrum of consumer audiences."
Last month, Wolfson unveiled a multi-year agreement with Samsung, which will see the Scottish group become primary audio component supplier for Samsung's top-selling Galaxy smartphones and tablets, including the S4.
It also announced that two of its chips would feature in the latest smartphone release in China from computing giant Lenovo, the second biggest player behind Samsung in China, and that it had two other Chinese smartphone customers.
Mr Hickey said: "China became the largest smartphone market last year, overtaking America, and the fastest-growing one."
The audio hub was also in the new flagship product of "an existing North American smartphone customer".
The company said second quarter revenue would depend on the timing of customer product launches, hence the guidance of $44m to $55m, while gross margin should rise to 43%.
The shares, which jumped 11p on Monday, eased 5.25p to 200.75p.
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