Wolfson Microelectronics Plc (WLF) survived three “innovate or die moments” four years ago, said Chief Executive Officer Mike Hickey. Now, the semiconductor developer has a vision of its future in voice-activated consumer products including smartphones, fridges and washing machines.
“Voice command is now a reality and the technology is in a place where you don’t have to be in science fiction for that to happen,” Hickey said in an interview. “We think we can enable that technology and we are a key part of getting that happening.”
Wolfson, spun out of Edinburgh University in 1984, was forced to reinvent itself after being hit first by the global credit crunch and then by the loss of Apple Inc. (AAPL), the world’s second-most valuable company, as a customer in 2009. Sales almost halved in two years amid a global economic downturn that led consumers to cut spending on electronic goods such as DVD players and flatscreen TVs.
Wolfson signed an agreement last month with Samsung Electronics Co. (005930), the world’s largest smartphone maker, to provide audio products for Samsung’s smartphones and tablets over a “multi-year” period. The shares have soared 30 percent since the tie-up was announced on April 11. The stock traded 0.2 percent higher at 222 pence at 10 a.m. in London.
This year, Wolfson will probably make a profit for the first time since 2008 with revenue rising 27 percent to $228.7 million, according to the average estimate of analysts surveyed by Bloomberg.
Innovate or Die
That represents a turnaround from 2009 when revenue plunged to $121 million from a peak of $232 million just two years earlier. Over the same period, Wolfson swung into a pretax loss of $14.8 million from a profit of $40.8 million.
“The credit crunch and disruptive technologies such as smartphones were quite helpful,” said Hickey who became CEO in 2008. “We had three ‘innovate or die’ moments all at the same time -- Apple kicking us out, the credit crunch, consumers not buying anything -- so we had to reinvent ourselves.”
Wolfson decided four years ago to focus on providing technology for smartphones and took the view demand would increase for what it calls an Audio Hub, which enhances voice-call quality and sound for music and video, Hickey said. The company also reckoned the number of audio applications would multiply, requiring more processing power on its chips while using less power.
Mobile devices have now overtaken Wolfson’s legacy business in hi-fi and TVs, generating more than 50 percent of revenue compared with 10 percent in 2009, Hickey said.
Wolfson’s Audio Hub was adopted by Samsung’s Galaxy S III smartphone, a rival to Apple’s iPhone, in June 2012, building on an existing supply relationship between the two companies. Samsung said yesterday it sold 10 million units of its latest flagship Galaxy S4 smartphone within a month of its release.
South Korea’s Samsung had 31.7 percent of the global smartphone market in the first quarter, ahead of Apple’s 17.3 percent, according to data from Bloomberg Industries and IDC.
Customers are now showing demand for Wolfson’s Audio Hub to host other applications such as sensors, Hickey said. Sensor development may be the next “big thing” in areas such as health care, he said, adding that hearing aids are already being used to measure a person’s pulse and temperature.
The company has also developed noise reduction software that allows people to talk on their mobiles in noisy places such as bars and trains by minimizing background sound.
David and Goliath
These applications may help the company increase the value of its products. Last year it shipped 400 million chips, earning less than 50 cents each. The company wants to increase that to $5, a 10-fold increase, Hickey said.
“One of the really interesting things in that hub/sensor opportunity is that we are talking about a computing platform that stays awake all the time,” Hickey, 54, said. “This is actually quite radical for anything mobile, anything battery powered.”
Wolfson estimates that its “always on” processor only uses 10 minutes of battery power every 24 hours, as many of the functions hosted on its chips used in consumer electronics are in “deep sleep” mode when they are not in use, Hickey said.
Voice-activated consumer products, such as top-of-the-range washing machines or speakers, will quickly become mass-market once they are released in about three years time, Hickey said.
“As these get better, people will get used to the voice controlled stuff and want it everywhere,” said Hickey, who already has a voice-controlled television. “As that becomes accepted we think we will be part of that story.”
“We fight David and Goliath battles every day and we are still alive,” Hickey said in London last week. “In terms of total semi-conductor market we are tiny. But we are relevant to all of the biggest companies in the world in consumer electronics.”
To contact the reporter on this story: Peter Woodifield in Edinburgh at email@example.com
To contact the editor responsible for this story: Douglas Lytle at firstname.lastname@example.org