Apple is one of the biggest clients for Wolfson's chips
Shares in chip maker Wolfson Electronics, which makes components for Apple iPods, fell up to 30% after it lost a contract with a major client.
The Edinburgh-based company said its chips had not been selected by a major customer - believed to be Apple - for its newest MP3 players.
It is understood that it will continue to supply chips for the Apple iPhone.
Wolfson said the impact of the loss would be mitigated by the growth of contracts to other clients.
Its chips are used in products such as digital cameras, mobile phone handsets and satellite navigation systems by companies including Sony, Microsoft and Canon.
"Wolfson remains confident in achieving growth in 2008 and currently anticipates full-year revenue consistent with market expectations," chief executive Dave Shigley said.
It expects revenue for the first quarter of 2008 to be between $44m and $48m (£22-24m).
Its shares closed down 18% at 117p.