Bellwether Wolfson warns of slowdown

Shares in the leading UK producer of electronic chips used in itemspopular at Christmas – such asdigital cameras, mobile phones and satellite navigation aids – crashedyesterday after the company warned of a sudden fall-off in orders.

Analysts believe this is the clearest sign yet that high-street shops are bracing for a disappointing Christmas and are unwilling to stock their shelves with products they are unlikely to sell.

Edinburgh-based Wolfson Microelectronics said sales in the fourth quarter would be up to 25 per cent below market expectations as it feels the effect of the consumer slowdown.

Earnings are now expected to come in around $45m-$50m (£25.5m-£28.3m) compared with a previous estimate of $60m. One analyst said: "The level of cut is worse than expected."

The chief executive, Dave Shrigley, who is due to bow out at the end of the year, said that in "recent days, Wolfson has experienced a material reduction in order intake, and a higher level of rescheduling of orders, across a broad range of applications and customers, as they respond to the continued deterioration in consumer confidence".

The level of orders placed with suppliers like Wolfson acts as a key barometer of the confidence in future business among producers of electronic gadgets.

Wolfson produces high-performance mixed signal semi-conductors for many of the world's leading electronic brands, including Apple, Canon, Hewlett Packard, Microsoft, Samsung and Sony.

Around 25 per cent of its total sales are to the mobile-phone market, which grew by around 50 per cent in the first half. Its top 10 customers account for nearly 60 per cent of its total revenue.

Timothy Shaw at broker Citi said he believed lower orders from its main phone-handset customers were most likely to have been the cause of the setback. The view was shared by broker Dresdner Kleinwort. "We suspect the Apple iPhone3G may have been partly responsible. There have been reports Apple has cut its production target for 2008 by 20 per cent to 14 million units."

Shares in the company fell 24.9 per cent to close at 82.25p.

Sale of chips for the digital still camera market were especially strong in the first six months and now represent around 8 per cent of total business. But demand in the high street is understood to have weakened in recent weeks.