Nvidia forecast higher sales for the current quarter and said its mobile business would take off next year when tablets and smartphones will use its Tegra chips.

Nvidia is trying to compete with AMD and Intel, which both are ready to launch microchips next year that combine traditional core processors with graphics processors. The company is moving into the fast-growing mobile business, combining low-powered processors designed by ARM with its own Tegra brand graphics processors for mobile devices.

Mobile devicesrunning Android operating system and Nvidia's Tegra chips will be released early next year, Chief Executive Jen-Hsun Huang told analysts on a conference call.

"Our Tegra business should be quite large. It'll be one of our largest businesses over time," he said, adding that mobile chip sales will help push Nvidia's gross margins above current levels of around 46 percent.

During fiscal year 2010,Intel had demonstrated the Tegra 600 Series, the company's first generation system-on-a-chip that enables an always-on, always-connected HD netbook that can go days between battery charges. Also, during fiscal year 2010, our Tegra product was included in Microsoft?s Zune HD and the Samsung M1, both of which were being sold in the marketplace. In addition, Nvidia announced its next-generation of Tegra processing technology during the recent Consumer Electronics Show in January 2010. Tegra combines browsing, streaming 1080p video and Flash 10.1 acceleration with a 3D user interface and days of battery life. Multiple next-generation Tegra designed tablets, smartbooks and smartphones are expected to ship during the second quarter of fiscal year 2011, Nvidia said.

Nvidia has also announced that Volkswagen and Audi will use next-generation Tegra starting in 2012.