Nvidia Unveils Handheld Gadget Chip

Chipmakers are wasting no time rushing into this market.
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Updated from 10:58 a.m. EDT

SAN FRANCISCO -- The nascent market for handheld Internet gadgets is still just a blip, but chipmakers aren't wasting any time chasing it.

Nvidia

(NVDA) - Get Report

is the latest silicon purveyor to jump on the bandwagon with the introduction of its new, energy-efficient processors, dubbed the Tegra 600 and Tegra 650.

The Santa Clara, Calif., company took the wraps off the new chip Monday, promising that low-cost machines featuring the Tegra chip will be available by the Christmas holiday season.

Nvidia will face some tough competition, most notably from

Intel

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, the world's No.1 chipmaker, whose

new Atom chip is targeting the same market

.

That market, which consists of gadgets known as mobile Internet devices and netbook PCs, is still relatively small. But the success of two products --

Apple's

(AAPL) - Get Report

iPhone and the Asus Eee PC -- have made the tech world take note.

Privately held Asus is expected to revamp its Eee PC by incorporating Intel's Atom chip, as are several other PC makers, in the coming months.

Meanwhile, Taiwanese chipmaker

Via Technologies

is taking steps to bolster its position in the market, with the release of its Nano processor aimed at a similar class of devices.

Unlike Intel's and Via's products, Nvidia's new chip is not based on the x86 chip architecture that is the standard for PCs, but rather on the ARM architecture more commonly associated with cell phones.

Nvidia contends that the energy efficiency of the ARM architecture makes it the technology best-suited for the new crop of mobile Internet devices (although the company's claim that the chip consumes below 100 milliwatts of power in idle mode doesn't seem that different than Intel's Atom, which Intel claims runs between 80 milliwatts and 100 milliwatts in idle mode).

Nvidia also says also says the new Tegra chips will integrate more functions on a single chip -- including an 800Mhz ARM11 processor, graphics processing and support for high-definition video -- giving PC makers more flexibility to create different product designs.

According to Mike Rayfied, general manager of Nvidia's mobile group, the Tegra processor will allow companies to produce devices with $199 price tags -- a nice discount to the $299-$599 price range of current netbooks.

Rayfield would not say which specific companies had committed to introduce Tegra-based machines, but noted that half a dozen vendors were currently developing product designs based on the chip.

The Tegra represents the latest step by Nvidia to branch out from the graphics processor business. Last year, Nvidia introduced a line of

chips designed for parallel processing in high-performance computing

markets such as financial analysis and oil exploration.

And in February, Nvidia introduced the APX 2500, another member of the Tegra family designed to function as the

application processor in smartphones

.

The move into mobile Internet devices and netbooks represents a bigger risk and a bigger opportunity, since the rules of the game are not yet written.

Intel is basing its strategy on the Centrino model that has served it so well in notebook PCs, with plans to offer the Atom processor alongside vital wireless communications components like WiFi, WiMax, Bluetooth and GPS.

Since Nvidia lacks the communications technology, the company is working alongside

Atheros

(ATHR)

and

Infineon

(IFX)

to provide PC makers with a complete menu of chips for wireless connectivity. Allowing vendors to pick and choose only the components they need is one way that Nvidia-based devices will achieve its lower price tag, says Rayfield.

Shares of Nvidia were recently off 9 cents to $24.61.