UPDATE 2-Cypress sees robust 2011 on tablet wave, shares up

* Sees Q1 rev $226-$231 mln vs est $222.4

* Sees Q1 adj EPS $0.23-$0.24 vs est $0.22

* Q4 adj EPS $0.25 vs est $0.24

* Q4 rev $226.6 mln vs est $225.6 mln

* Shares up 9 pct

(Recasts, adds conference call details, analyst comment, updates share movement)

By Himank Sharma

BANGALORE, Jan 27 (Reuters) - Cypress Semiconductor (CY.O) said it sees touchscreen emerging as its largest business in 2011 as it positions itself to tap a slew of tablets expected to hit the market this year.

The company's touch business, which accounted for about 11 percent of its revenue in 2010, is expected to grow to a quarter of overall revenue this year, according to analysts.

"True touch could become one of our largest product families in the first quarter, and I think sometime during 2011, touch will actually be bigger than the synchronous SRAM business," Chief Executive T.J. Rodgers said in a call with analysts.

The company, which has traditionally been known for its SRAM chips that help computers perform core memory functions, has leapfrogged into the smartphone market with several design wins with handset original equipment manufacturers (OEMs).

Cypress' touchscreen chips are used in Apple Inc's (AAPL.O) iPod nano, Samsung's Galaxy series of phones and HTC's Android and Windows phones, and the company competes with Synaptics Inc (SYNA.O) and Atmel (ATML.O) for leadership in the segment.

"For a business that used to rely on PCs and industrial and communications and all the related swings, for them to attach themselves to the growth of smartphones is a pretty good place to be," Dougherty & Co analyst Charlie Anderson said.

"It's not just a cellphone story anymore but also a tablet story and consumer devices story."

Cypress said it doubled the number of mobile handsets manufacturers it supplies to in 2010 and also announced touch related design wins for netbook, printers and media players.

The company also announced plans to unveil new chip products aimed at the tablet market this year.

For the first quarter, Cypress said it expects earnings of 23-24 cents a share on revenue of $226-$231 million, above market estimates of 22 cents earning on $222.4 million in revenue, according to Thomson Reuters I/B/E/S.

Fourth-quarter revenue came in at $226.6 million, boosted by a 27 percent sequential increase in the company's handset revenue, which includes touch sensors and system-on-chip products sold to OEMs in the mobile phone market.

Separately, rival On Semiconductor (ONNN.O) announced that it has purchased Cypress' CMOS sensor business, which makes sensors for digital cameras, for $31.4 million in an all-cash deal.

Cypress shares, have almost doubled in value in the last one year as the company returned to profit. They were up 9 percent at $22.12 in afternoon trading on Nasdaq.

(Reporting by Himank Sharma in Bangalore; Editing by Roshni Menon and Saumyadeb Chakrabarty)