Rising sales of smartphones and tablets boosted profit at touchscreen chipmakers Cypress Semiconductor and Synaptics Inc even as their traditionally strong PC market continued to slow down.
Cypress Semiconductor gave a blowout forecast for the current quarter as it expects its touchscreen business to double in 2011.
What began as a niche market 15 years ago -- when Silicon Valley-based Synaptics put a credit card-sized touchpad on the Apple Mac Book -- is expected to be worth $9 billion in the next couple of years as touchscreens graduate from handsets and tablets to cameras, GPS devices and car dashboards.
Non-PC revenue -- which consists of mainly touchscreen chips -- grew over 87 percent for Synaptics in the third quarter, contributing 57 percent to its revenue, up from less than 35 percent a year ago.
Revenue from the company's PC division fell 15 percent in the quarter, while overall revenue rose 23 percent to $142.2 million.
Global PC shipments declined 3.2 percent during the first quarter of 2011, according to research firm IDC, hurt by tablets cannibalizing netbooks coupled with waning consumer enthusiasm and disruptions from the Japan earthquake.
Cypress expects the touchscreen chip segment, which became its largest business in the first quarter, to more than double in size by the end of the year.
"This is an emerging market with very little competition. So there is hardly any pricing pressures on the company's Truetouch line of products, which is driving the growth," Wedbush analyst Betsy Van Hees told Reuters.
Cypress and Synaptics along with Atmel Corp control over 90 percent of the market for touchscreen chips, according to analysts.
IDC said tablet shipments grew 45.1 percent in the third-quarter of 2010 -- 90 percent of which was Apple Inc's iPad.
Apple sold almost 15 million iPads in 2010; RIM is expected to move 3 million PlayBooks in a similar window in 2011, according to 18 analysts polled by Reuters, even as HTC Corp, Motorola Inc, Samsung Electronics and LG electronics flood the market with tablets running Google Inc's Android.
Cypress shares closed up 8 percent at $20.93 on Thursday on Nasdaq. More than 10 million shares changed hands - over 4 times their daily volumes.
Synaptics shares were up at $27.99 in extended trading. They closed at $27.94 on Nasdaq on Thursday.
(Reporting by Himank Sharma in Bangalore; Editing by Don Sebastian)