THE County Durham operation of microwave products designer Filtronic, is set to sell its first semiconductors next month for use in the mobile phone market.

The products are being developed at the Newton Aycliffe facility as part of a partnership with US business M/A-Com.

The rate of increase of production and the ultimate level of the business with the American firm, will depend on the success of the end products in their related markets.

The news came as Filtronic issued a trading update, ahead of a visit by analysts and institutional investors to its operations in Finland, bought from Nokia in 1998.

The company revealed that a technical development relationship between the Newton Aycliffe facility and BAE Systems Avionics was progressing well, although the resultant business opportunities will not be for some time.

Filtronic's upbeat statement came despite the downturn in the global market for mobile telephones.

The company's executive chairman, Professor David Rhodes, said: "In recent weeks, the major original equipment manufacturers in the wireless infrastucture and cellular handset markets have reported challenging market conditions and lower than expected first quarter sales."

He added: "Their outlook for the rest of the calendar year indicates the market will decline by ten per cent or more compared with 2001."

Despite the poor outlook, Prof Rhodes said Filtronic had performed well. While total sales in the second half of the year are expected to fall, operating profits will show a substantial improvement on the previous year.

The Newton Aycliffe plant, on the site of the former Fujitsu operation, still expects to employ more than 60 staff by the end of the year.

Prof Rhodes said: Several processes had been developed to enable the agreement with M/A-Com to progress.

"The technical development relationship with BAE Systems Avionics is progressing well, although the resultant business opportunities are not expected in the near term."

Looking ahead to the next financial year, Prof Rhodes said the market would continue to be unpredictable, due to the uncertainty over the timing of the roll-out of new 3G mobile phone equipment.

He added: "I believe when substantial 3G roll out occurs, it will provide excellent growth for Filtronic with our existing product range."