AMD, Intel Rivalry Moves to Hand-Held Market

Indeed, many of the rules of engagement that the two companies have played by in their long-running PC rivalry may work differently in the handheld world, where the dynamic isn't a two-person chess match but a wide-ranging brawl among numerous players.

Companies such as Texas Instruments(TXN), Qualcomm(QCOM) and Infineon Technologies(IFX) already provide processors used in many of today's smart phones, MP3 players and handheld game consoles, and have strong relationships with the companies that make the devices.

Broadcom(BRCM), like Intel, is also assembling a package of communications chips that includes Wi-Fi and Bluetooth that it can offer handset makers as an all-in-one package.

In July Broadcom added another piece to the puzzle when it closed a $143 million acquisition of GPS chipmaker Global Locate.

Stifel Nicolaus analyst Cody Acree believes Intel's manufacturing prowess gives it a key advantage as it enters the handheld market.

"As far as advanced production, Intel is usually about a year ahead of anyone else in the industry," Acree says. By pumping out chips with ever finer circuitry, Intel enjoys big gains in performance, power consumption and smaller chip dimensions, all important factors in the handheld market.

Stifel Nicolaus makes a market in Intel shares and has provided the company with noninvestment banking services in the past 12 months.

The question is whether Intel will elect to use its manufacturing muscle.

Acree notes that Intel has proven reluctant to devote its advanced production resources to handheld chips in the past, reserving its best manufacturing capacity for its PC microprocessors. The Xscale chip -- Intel's previous attempt to enter the handset market -- was manufactured using a process that was a couple of generations behind Intel's flagship Core microprocessors.

Intel has to be wiling to commit leading-edge resources," Acree says. "If not, they're just another competitor out there among dozens of competitors."

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