As PCs, cell phones converge, Intel finds new rival

SAN FRANCISCO (MarketWatch) - As the market for personal computers has matured, Intel Corp. has moved into new battlegrounds for portable devices - bringing the semiconductor giant a roster of new rivals.

One of the main ones is ARM Holdings, a lesser known British technology company with a strong track record of designing low-cost, low-power chips for mobile phones.

The companies are likely to collide in a new market for portable computing devices that fall between laptop computers - a market Intel /quotes/comstock/15*!intc/quotes/nls/intc (INTC 18.71, -0.07, -0.37%) currently rules - and cell phones, which is ARM’s key market. Intel already has a strong foothold in this market with its Atom chip, which powers so-called netbooks. But a rush is on to develop new devices that can offer consumers the full computing power of PCs and the portability of a wireless phone.

“We have this hybrid market literally riding the line between the two,” analyst Dean McCarron of Mercury Research said in an interview. “All the ingredients for the collision are there.”

ARM /quotes/comstock/15*!armh/quotes/nls/armh (ARMH 6.25, +0.06, +0.97%) technology is used in millions of cell phones and other products made by companies, such as Samsung /quotes/comstock/11i!ssngy (SSNG.Y 185.67, +0.53, +0.29%) , Nokia /quotes/comstock/13*!nok/quotes/nls/nok (NOK 12.25, -0.10, -0.81%) and Palm /quotes/comstock/15*!palm/quotes/nls/palm (PALM 13.51, -0.03, -0.22%) .

On the other hand, Intel’s chips power the world’s most popular PCs made by such companies as Hewlett-Packard /quotes/comstock/13*!hpq/quotes/nls/hpq (HPQ 43.98, +0.15, +0.34%) and Dell Inc. /quotes/comstock/15*!dell/quotes/nls/dell (DELL 14.55, +0.10, +0.69%)

Intel and its allies have been pushing the netbook, the stripped down version of a notebook, and so-called MIDS, or mobile internet devices. Meanwhile, the wireless market has been moving toward smart phones such as the iPhone, BlackBerry and Palm Pre that offer Web surfing and email capabilities.

Power vs. consumption

It’s a collision where two factors could prove critical: A processor’s computing capability, and its appetite for electrical power. Intel is widely expected to have a huge advantage in performance, while ARM is seen as having the edge in power efficiency.

Bob Morris, ARM’s director of mobile computing, portrays Intel as being in a desperate position, saying the chipmaker has no choice but take on the new market because it now finds itself boxed in in the maturing PC market.

“Intel has to go after this market, as the PC market is not growing,” he said in an e-mail. “The growth market moving forward will be the mobile device market. We are closely approaching the point (if we are not there already) where people accessing the Internet from a mobile device will exceed those accessing it from a PC.”

Intel Spokesman Tom Beerman disputed that view, saying the company is moving into the new market because of opportunities in the changing cell phone market.

“Cell phones are becoming more PC-like,” he said. “There are more and more requirements for that device to be more PC-like. Our view is that Intel is very well suited to provide that technology.”

Not a household name

Despite the ubiquity of its technology, ARM, which is based in Cambridge, UK, is not a household name, like the Silicon Valley behemoth made famous by its slogan, “Intel Inside.”

“They’re very invisible,” Global Equities Research analyst Trip Chowdhry said in an interview. “You don’t see devices saying ‘ARM Inside,’ or ‘Powered by ARM.’ I don’t think they have the mass consumer awareness like Intel.”