* Sandy Bridge chip lined up for 500 PC models
* Includes content protection
* Combines central and graphics processing
SAN FRANCISCO, Jan 2 (Reuters) - Intel Corp's (INTC.O) new microchips, touted as its biggest-ever leap in processing power, include built-in content protection to make it safer for Hollywood studios to offer premium movies to consumers over their personal computers.
Time Warner Inc's (TWX.N) Warner Bros Digital Distribution and other studios plan to offer high-definition movies to consumers whose computers use the chips, code-named Sandy Bridge, at the same time as they are released on DVD, Mooly Eden, Intel's vice president and general manager of the PC Client Group, told Reuters last week.
"We have been able to develop an end-to-end solution that will allow the premium content to be streamed to (computers with Sandy Bridge chips)", Eden said in an interview. "We are striking all the deals with the (studios and content distributors) to make it available."
The processors, recently shipped to manufacturers, are a big bet as Santa Clara, California-based Intel wrestles with a weak U.S. economy and sluggish consumer demand for PCs.
As well as protecting studios from piracy, the chips, which Intel will showcase at this week's Consumer Electronics Show in Las Vegas, include improved multimedia processing.
Sandy Bridge, which will be sold under the Intel Core brand, for the first time unites central processing and graphics processing on the same piece of silicon, making it faster, more energy efficient, and likely more profitable.
"The cost structure is better, the chip is smaller, all things being equal, and performance is better. It's going to be very important for the company," Hans Mosesmann, an analyst at Raymond James, said last week.
Intel, whose microprocessors drives eight out of 10 PCs in the world, said Sandy Bridge's graphics capabilities are good enough for casual computer game players.
While competitors disagree, Eden said Sandy Bridge will make low-end graphics chips currently installed in many PCs unnecessary, which could reduce costs for manufacturers.
"We've got more than 500 design wins in notebooks and desktops. You'll see many of them ranging from all-in-one, to big gaming machines, to notebooks," Eden said.
Quick to defend its territory, graphics chip designer Nvidia Corp (NVDA.O) said consumers want improved graphics performance, and some manufacturers appear to be hedging their bets instead of relying solely on Sandy Bridge chips.
Nvidia says manufacturers have chosen its graphics chips for 200 new notebook models in 2011 that also feature Intel's Sandy Bridge, compared with about 125 notebooks in 2010.
Advanced Micro Devices Inc AMD.N will show off its own new chip lineup that also combines central and graphics processing, at the consumer electronics show. It is unclear how it will compare to Sandy Bridge in performance and price.
Intel is selling its Core i3 chip, with two cores -- or engines -- to manufacturers for $117 and its top-of-the-line Core i7, with four cores, for $1,096.
As weak consumer sentiment hurt sales of notebooks in 2010, Intel's share of the world semiconductor market slipped to 13.8 percent from 14.2 percent in 2009, according to market research firm Gartner.
In 2011, notebook sales may struggle again as some people purchase Apple Inc's (AAPL.O) iPad or tablets being launched by competitors like Hewlett Packard Co (HPQ.N).
While it remains by far the largest microchip maker in the world, Intel has fallen far behind in the fast-growing market for smartphones and tablets, which experts say could become the main point of contact with the Internet for many people and eventually lead to less reliance on PCs.
Intel's Atom chips dominate the smaller netbooks but smartphone and tablet manufacturers have mostly rejected them in favor of more power-efficient chips based on ARM Holdings (ARM.L) architecture that are made by companies like Qualcomm Inc (QCOM.O) and Marvell Technology Group Ltd (MRVL.O).
Intel is betting that other new chips due out early next year will help it carve out a piece of the mobile market. (Reporting by Noel Randewich; editing by Jeffrey Benkoe)