Worldwide semiconductor revenue is expected to increase by 31.5% to reach $300bn in 2010, compared to $228bn in 2009, and is projected to reach $314bn in 2011, according to the new report from Gartner.

Gartner said that it has increased the projections of 2010 revenues from its second quarter forecast, when it expected worldwide semiconductor sales to increase 27.1% in 2010.

Though the semiconductor revenue is increasing at record levels in 2010, second half growth is projected to be below seasonal norms as semiconductor sales align with electronic system sales.

Gartner research vice president Bryan Lewis said the impact of the European credit crisis has subsided, the global economic recovery is slowing, and there is concern that electronic equipment vendors are adopting a cautious stance, ready to cut production at the first signs of slowing customer orders.

The PC supply chain is showing the evidence of a correction, as can be seen by recent company announcements, including Intel’s lowering its third quarter guidance, and the forecast of second half 2010 PC production unit growth has been reduced in the third quarter of 2010 update.

The consumer PC purchases in mature markets were weaker than expected in the second quarter and the outlook for the third quarter is below seasonal growth.

However, surging sales of media tablets are partially offsetting the weakness in consumer PCs, as they’ve begun to prove themselves a popular substitute for netbooks, the research firm added.

Further, the application-specific semiconductors for the phone market are experiencing competitive pressure, with revenue growing only about 13% in 2010, with smartphones representing 18% of units and 36% of overall 2010 mobile phone semiconductor revenue.

It is expected that smartphones units will increase to 41% and account for 64% of mobile phone semiconductor revenue by 2014 while, DRAM revenue is expected to reach its peak in 2010.

"Due to early strength in the PC market and supply constraints, the DRAM industry has been very profitable, with revenue set to increase by 82.5% to nearly $42bn in 2010," Lewis added.

"However, during the second half of 2011, this is set to change, and we expect a DRAM downturn in 2012 as sales decline 29%."