U.S. microchip designer Marvell Technology Group Ltd raised its third-quarter revenue outlook on Monday, citing better demand from customers in a number of markets.

Marvell's improved forecast, which sent it shares up over three percent, is just the latest positive sign from the semiconductor industry as demand for consumer electronics begins to recover, particularly spending on personal computers.

The company's chips are used in a array of products, from hard drives to smartphones such as Research in Motion Ltd's BlackBerry and communications networks.

For the quarter ending Oct. 31, Marvell expects net revenue of $760 million to $775 million, up from its previous forecast of $680 million to $730 million.

Analysts on average had been expecting the company to post a revenue of about $710.6 million, according to Thomson Reuters I/B/E/S.

Marvell's largest customer is hard disk drive maker Western Digital, which last week posted much better-than-expected results on strong consumer demand for its drives and set a forecast for the current quarter above Wall Street targets.

Thomas Weisel Partners analyst Kevin Cassidy said Marvell has roughly 50 percent exposure to the hard disk drive (HDD) market.

We believe Marvell continues to benefit from improving PC demand, particularly in notebooks and, from our point of view, new HDD controller design wins ramping into production, Cassidy wrote in a research note.

Cassidy, who has an overweight rating on Marvell's shares, raised his price target to $19 from $16.

Shares of Marvell were up 3.2 percent to $15.05 in late morning trading on the Nasdaq.

The PC market as a whole has begun to rebound from lows seen earlier in the year. Research group IDC said global third-quarter PC shipments rose a better-than-expected 2.3 percent as sales of cheap consumer notebooks and netbooks showed continued strength.

For 2010, some analysts expect growth of roughly 10 percent in the PC market, as companies start to upgrade aging machines and move to Microsoft's new Windows 7 operating system.

Marvell, which is incorporated in Bermuda but headquartered in Santa Clara, California, also said a one-time tax benefit during the current quarter will result in a gain of five cents per share on a GAAP basis.

(Reporting by Gabriel Madway in San Francisco and Ajay Kamalakaran in Bangalore; Editing by Himani Sarkar and Tim Dobbyn)