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CSR seeks iPod application to give headphones a wireless future

CSR's chips would allow Apple to manufacture iPods with wireless headsets, an increasingly popular feature of mobile devices among consumers. Apple has sold more than 22 million iPods and although it is possible to buy separate adapters that connect an iPod to earphones wirelessly, the music players do not come with Bluetooth as a standard.

CSR confirmed it had approached Apple after publishing a bullish trading update yesterday that showed sales of its chips, which enable devices to provide wireless connections using the Bluetooth technology standard, are rising faster than expected. Its shares jumped 14 per cent, or 77.5p.

The company's market share has risen from 51 per cent in the first three months of this year to 56 per cent in the second quarter, according to Paul Goodridge, the finance director. Its Bluetooth chips are being installed in more than 60 per cent of all new devices that are given official Bluetooth design accreditation.

The market for Bluetooth chips is being driven by booming demand from mobile phone manufacturers and growing applications for personal computers, such as wireless headsets to make telephone calls over the internet. CSR said one-fifth of all new mobile phones shipped in the second quarter of this year had Bluetooth wireless technology. That proportion is expected to rise in the third quarter, the company said.

Legislation to ban motorists from holding mobile phones while driving is also increasing demand for Bluetooth headsets, with laws being introduced in Chicago, for instance, boosting the relatively undeveloped US market for wireless connections. Mainstream car manufacturers such as Ford have also started building Bluetooth technology into dashboards. This allows in-coming calls to be routed through a car's stereo system, cutting out music when a call is received and starting it again when the call ends without drivers needing to take their hands off the wheel.

Mr Goodridge said: "A year ago it was just people like BMW and Audi doing it. Now it's Nissan, Toyota, Renault and Ford putting it into their dashboards." CSR said this year it expected third-quarter sales of $125m-$135m (£70m-£75m) compared with $94m in the second quarter. An increasingly strong market means its sales are expected to hit $155m-$160m in the third quarter. The market as a whole is expected to see 270 million Bluetooth chips supplied this year compared with 140 million in 2004.

"We are now seeing all the top tier of phone makers putting Bluetooth in their products," Mr Goodridge said. New, higher capacity Bluetooth technology that handles more data at high speed will also shortly be available, further expanding the market, he added.

The company's trading statement said the strong demand in the current third quarter which ends on 30 September is expected to continue into October and November, with the run-up to Christmas expected to deliver a further boost to the company's shipments.