Mobile Gadgets Fuel Chip Sales

Consumer lust for mobile gadgets is hotter than ever.

And that means fertile business conditions for chipmakers, whose fortunes in 2008 will be defined by the proliferation of new mobile and wireless electronic devices.

"In the old days, mobility was a notebook. Now mobility really is a phone," says Roger Kay, president of the technology research firm Endpoint Technologies.

Apple's(AAPL Quote)iPhone, released to great fanfare in 2007, was a showcase of the benefits of what Kay calls "hyper-mobility" technology. As more iPhone-like products hit store shelves in 2008, a slew of specialized chips responsible for the coolest features are on track to go mainstream.

Mobile Lust Will Drive Chipmakers in '08

For instance, the iPhone's multitouch panel, the result of special touch-screen sensor technology and a controller chip, is destined to appear on an increasing number of cell-phone displays.

"There's always some feature that drives demand," says ThinkEquity Partner's Robert Burleson. And right now, he says, multitouch displays for cell phones are high on the list.

A number of companies, including Cypress Semiconductor(CY Quote) and Analog Devices(ADI Quote), make touch-screen controller chips. But Burleson reckons that increasing competition could drive down prices of the chips, diluting the sharp growth in the technology's adoption into cell phones.

MEMS chips, which are responsible for the iPhone's ability to rotate the on-screen image according to the handset's physical position, are more difficult to manufacture and less vulnerable to competitive threats.