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Mobile Gadgets Fuel Chip Sales

Chipmakers will flourish from the growing market for mobile and wireless devices.

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.


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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

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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

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Analog Devices

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, 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.

Once reserved for industrial and automotive applications, such as airbag sensors, MEMS, or microelectromechanical, chips are

increasingly being designed into consumer electronic devices such as cell phones.

ST Microelectronics

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, one of the main MEMS makers, has said it expects to reduce the cost to $1 per chip in 2008 -- a level that analysts believe will make the technology viable for a broad array of handsets.

And the recent string of acquisitions of GPS chip firms --



shelled out $146 million for Global Locate in June, and

Atheros Communications

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bought U-Nav in December for $54 million -- points to another rising silicon star within cell-phone handsets.

Smartphones featuring GPS chips, which communicate with overhead satellites to determine geographic location, are quickly emerging as an alternative to stand-alone navigation devices, according to the industry research firm iSuppli. The firm projects that the number of GPS-enabled cell phones will grow roughly 49% in 2008, from 162 million devices to 240 million.



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, the dominant maker of PC and server microprocessors, is

keen to get in on the handheld action. The company will release an energy-efficient mobile processor in the first half of 2008 dubbed Silverthorne, which uses the same x86 instruction set as its PC microprocessors.

Intel hopes Silverthorne will entice tech companies to develop a wave of new handheld gadgets that it refers to as mobile Internet devices. But Intel will be entering a crowded field, where chip heavyweights such as

Texas Instruments

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already sell application processors for smartphones.

And many of the most important benefits of Intel's new low-power processor, such as integrated graphics, video and memory, as well as robust voice communications capabilities, won't appear until the second generation of the chip arrives in 2009 or 2010.

Fortunately for Intel, the PC market is providing plenty of near-term business, with the demand for notebooks showing no signs of cooling off.

In 2007, notebook PCs out-shipped desktops for the first time in the U.S. As that trend spreads to other regions of the world in the coming years, companies whose chips cater to portable PCs will enjoy a nice tailwind. More notebooks, for instance, means more wireless networking chips of the kind made by Atheros,

Marvell Technology Group

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and Broadcom.

The notebook boom is also good news for the top PC makers such as


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, which are likely to consolidate their share of the worldwide PC market.

That's because notebooks are not easily snapped together from off-the-shelf components, as is the case with desktop PCs. As a result, smaller PC vendors that sell lesser-brand-name notebooks are at a competitive disadvantage because they lack the big firms' design and engineering resources.

"It becomes a little harder to have smaller players in the notebook market," says Gartner analyst George Shiffler.

The biggest change in notebooks in 2008 involves the recent debut of "ultramobile" notebooks such as the $400 Eee PC from Taiwan's


, as well as the One Laptop Per Child XO laptop.

In the near term, the tiny notebooks may prove to be the market best suited for the solid-state hard drives that use NAND flash memory chips in lieu of magnetic technology.

Anticipation from investors and analysts is mounting that Apple will release an ultra-slim, flash-based notebook in 2008, possibly as early as January's annual Macworld Expo. Apple's so-called "sub-notebook" is likely to use touch-screen sensitivity similar to the iPhone, and carry a $1,500 price tag, say UBS analysts.

As with smartphones and MP3 players, Apple could once again be the one to turn an emerging technology into a must-have product.

Reporter Daniel Del'Re contributed to this story