CSR, the British microchip designer, became a potential bid target yesterday after it admitted demand for its chips from major electronics companies had dropped and its shares plunged for the second time this year.

The Cambridge-based company blamed growing economic uncertainty for the fall in business, saying it is causing manufacturers of consumer devices, that include its short-range Bluetooth wireless technology, to hold off making equipment. CSR's chips are found in devices such as mobile phones and headsets.

"Macro-economic issues are affecting demand for our customers' end products," said the chief executive, Joep van Beurden. "The economic climate and its impact on consumer sentiment is continuing to lead our customers to lower their inventory levels and shorten order times, particularly in the consumer electronics and headset segments."

The company also wrote off the entire value of UbiNetics, the Cambridge business it bought only three years ago for £27m, as it admitted that its hopes for the company have not come to fruition.

CSR had hoped buying the business would allow it to bundle its technology into chips for mobile phones, giving it a larger slice of the overall market. But it admitted yesterday that integrating its technology with that of UbiNetics "is unlikely to happen due to the practical difficulties of integration and the differing timescales of product development".

As a result the company recorded a first-quarter loss of $41.9m (£21m) compared with a slight profit last year, while sales were up less than 1% at $160.9m.

Shares in CSR plunged 71p, almost 18%, to 324p, valuing the business at £430m. The shares were changing hands at over 900p in July but lost 24% in February after the company warned first-half revenues would be flat as a result of weak demand. Analysts said yesterday the share price plunge means the company has become an obvious bid target.