Chip giants this week took aim at what analysts see as the next major growth area for the tech industry: the market for mobile Web-connected devices that are bigger than cell phones but smaller than regular laptops.

 Intel, the world's No. 1 computer chip maker and considered a pioneer in the market for mobile Internet devices, unveiled Tuesday the latest version of its Atom processor, designed for the new category of gadgets.

Also this week, Nvidia Corp. unveiled a new family of microprocessors, called Tegra, which the graphics chip giant described as a "mobile computer on a chip" geared to "small pocket-type devices."

Analyst Nicholas Aberle of Caris & Company said companies such as Intel and Nvidia have identified "a big opportunity that's going to be emerging in the next several years."

"They are trying to position themselves to partake in that," he said in an interview. "These guys have rightfully identified a transition that's going to take place."

Mobile internet devices generally have 4-inch to 12-inch screens and cost roughly $200 to $300. While companies like Palm Inc. and Hewlett-Packard have introduced pocket-size computing devices in the past, analysts say the new gadgets are designed to be more compatible with personal computer systems and integrated with the Web.

"Some of this is as old as the hills," said analyst Brian Piccioni of BMO Capital Markets. However, he added, the new devices address many consumers' desire for mobility, Web-access and PC compatibility.

"I'll never be able to do a spreadsheet on my Blackberry because the display is so damn small," he said, adding that many notebooks are still too big and heavy to carry around conveniently.

Power is key

Analysts say the rise of high-performance chips that consume less power is going to be vital to the growth of the market for mobile Internet devices, especially at a time when Web users are handling more video and other forms of multimedia content.

Nvidia's Tegra, for example, is described as "smaller than a U.S. dime" but can offer a "visual PC experience" while "consuming a smaller amount of power."

"What's ultimately different is we now have the technology to make these things work right," Aberle said. "Chips are the key to addressing performance and power. They are essentially the heart and soul of these applications, to have high performance with low power requirement."

Analyst Krishna Shankar of JMP Securities said that, while Intel is seen as the pioneer in the new market, the chip giant faces a major challenge from Nvidia and its "revolutionary lower power, HD enabled, 3-D graphics" Tegra product.

Analyst Blake Fischer of Stifel, Nicolaus & Co. echoed this view, saying, "We believe that given the higher level of integration and lower power profile, Nvidia's products will have a competitive advantage."

However, analyst John Dryden of Charter Equity Research said he sees the market for mobile Internet devices taking time to develop.

 "We don't see this as an incremental market until 2009, and it will be smaller than consensus expectations," he said.

Dryden said companies like Intel and Nvidia, which have traditionally focused on the PC market, may have a harder time expanding into the broader mobile wireless space dominated by cell-phone chip manufacturers, such as Texas Instruments Inc. , Qualcomm and ARM Holdings.

He said the mobile Internet devices market is "good news" for Intel, Nvidia and Advanced Micro Devices because it would allow them to "up-sell additional products."

But he added, "I don't think it'll take over the cellular market. This is a different ball of wax."

Source:Dow Jones Newswires