Intel's Atom Chip Faces Supply Squeeze

Not so long ago, many financial analysts were not even including any contribution from Atom in their revenue models. That was when the chip was deemed as primarily a processor for souped-up cell phones, a market replete with entrenched players like Texas Instruments(TXN Quote) and Qualcomm(QCOM Quote) that Intel has struggled to crack in the past.

With the success of the Eee PC however, Intel may have found a market that's ideally-suited for its newest processor. Unlike the cell phone market, the PC industry -- from hardware to software -- is already standardized around chips based on Intel's x86 architecture. And while the Atom still runs at a higher wattage than what's required for cell phones, the chip's power consumption is significantly better than that of today's existing laptop chips.

At a briefing with financial analysts in March, Intel said it had commitments for Atom-based netbooks from virtually every major PC maker.

While Intel has acknowledged the gross profit margin for Atom processors is below that of its other microprocessors, the company says the chip can still be sold at a healthy profit margin.