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Intel's Atom Chip Faces Supply Squeeze

Low-cost computer makers are predicting a shortage later this year.

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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


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


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, 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.

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

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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.