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Intel's Atom Chip Faces Supply Squeeze

SAN FRANCISCO - The newest member of Intel's (INTC - Get Report) chip family, the low-cost Atom processor, hasn't begun shipping, yet there may not be enough of them.

Computer makers, who want Intel's new microprocessor for a nascent breed of low-cost, extra-small notebooks, are predicting that there won't be enough Atom processors to go around when it becomes available later this year.

"We will see a severe shortage in Atom processors that will last well into the third quarter," said Asustek CEO Jerry Shen during a conference call discussing the Taiwanese firm's first-quarter financial results, according to news reports.

Asustek has been at the forefront of the new market for low-cost notebooks with its Eee PC, a stripped-down device that's half the size of traditional notebook PCs and can cost as little as $299.

Asustek expects Eee PC shipments to surge 70% to 80% in the current quarter, according to the Financial Times. And a slew of other companies, including Hewlett-Packard (HPQ - Get Report), Dell (DELL) and Acer, have released similar low-cost notebooks, or plan to in the coming months.

The current crop of ultramobile PCs rely on an assortment of microprocessors, ranging from older-generation Intel chips to chips from Taiwan's Via Technologies. With Atom, the PC makers will have a chip built with Intel's most advanced manufacturing processes and specially designed for energy-efficiency and for use in low-cost devices.

The reports of strong demand could bode well for Intel, which has said it expects the Atom to triple the size of the potential market.
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