Atmel's touch to power more tablets in 2011

BANGALORE (Reuters) - U.S. chipmaker Atmel Corp sees rising sales of its touchscreen controllers next year amid a surge in demand for tablet devices, and said it had already won a large number of customers.

"We think that, for touch controllers, 2010 is the year of the smartphone ... 2011 will be the beginning of tablets and we think that will be the story for 2011 and 2012," Chief Executive Steven Laub told Reuters.

Atmel, which launched its maXTouch controllers last year, expects touch controllers to grow by double digits next year after topping $140 million in sales this year.

"The reason people are focused on maXTouch is because it has been a particularly explosive growth," Laub said in a telephone interview.

The $4.6 billion company has already seen Samsung Electronics, one of its smartphone customers, start selling Galaxy Tabs, the first of the South Korean group's mobile tablet devices using maXTouch technology.

Analysts expect Samsung to come up with Galaxy Tab 2, using Atmel's touch controllers in its multitouch device. Nokia, Motorola, HTC and Dell Inc are also expected to launch tablets that may use Atmel's chips.

Laub said the number of customer wins yet to be announced was in "very substantial double digits."

Atmel declined to say which new tablet customers would use its touch controllers, but said it was in talks with Samsung and others to deliver a number of tablets next year that will include multiple touch devices.

Tablets can use either a single touch controller or 3-4 controllers. A tablet with multiple touch devices can magnify Atmel's sales.

Research firm Gartner expects the tablet market created by Apple Inc's iPad to soar to 55 million devices next year from 19.5 million this year.

CONNECTING TOUCH

Atmel, which also sells nonvolatile memory, radio frequency and system-level integration semiconductor products, expects growth in microcontrollers, boosted by touch controller demand, to overshadow growth in other segments.

"We expect our other businesses to grow, but the fact that microcontrollers are growing so much faster ... we expect it will be well over 60 percent of revenue in 2011," Laub said.

Microcontrollers -- entire computers on a single chip that can be used in anything from cars to smartphones -- currently contribute 57 percent of the company's sales.

Atmel, which competes with Cypress Semiconductor Corp and Synaptics Inc, expects its gross margins to grow in 2011. Gross margins rose to 47 percent in the third quarter, the highest level since 1996.

Atmel -- which saw its shares hit an 8-1/2-year high earlier this month -- also sees its automotive business unit, which earns around a tenth of total revenue, getting a boost as touch controllers are adopted in cars.

"There will be a very substantial adoption of touchscreen controllers into automotive in the next 2-3 years," Laub said.

"We're certainly looking to participate in that market and will tie up with as many luxury car makers as we can."

(Reporting by Supantha Mukherjee in Bangalore, Editing by Ian Geoghegan)