Intel sees big dollars in tiny package

By Duncan Martell

SAN FRANCISCO (Reuters) - For all the hubbub about emerging markets and developing economies in China and India, chip maker Intel has found a new market in its own back yard for its first new microprocessor design in years.

The world's largest computer chip maker is readying the processor, code-named Diamondville, for introduction toward the middle of this year. It is initially targeted at super-compact, mobile PCs costing around $250. And it will cost far less than the processors that Intel typically sells to PC makers.

"At the beginning, we said let's see what is the opportunity in the emerging markets," said Mooly Eden, who heads up Intel Corp's (INTC.O: Quote, Profile, Research, Stock Buzz) Mobile Platforms Group, in an interview. "Now, I wouldn't be surprised if at least 50 percent of the Netbooks would be sold in mature markets."

Netbook is the internal name Intel gave to the diminutive design, but PC makers such as Hewlett-Packard Co (HPQ.N: Quote, Profile, Research, Stock Buzz) and Dell Inc (DELL.O: Quote, Profile, Research, Stock Buzz) will give the portable PC their own names. Eden expects big PC makers to design and sell the portable PCs using the new Intel processor.

And Intel also expects to sell lots of these new chips, which for now have the internal place-holder name of Fred. Intel will soon announce a new brand name for the processor.

"I believe the number in 2011 will be well above 50 million," Eden said, referring to market research estimates on the number of Netbook-type PCs such as the Eee PC that will be sold.

The Netbook is around the same size as the Asus Eee PC, which has been a runaway success. Dean McCarron, an analyst at Mercury Research, said the Eee PC, which uses the Linux operating system instead of Windows, sold 350,000 units in the fourth quarter.

"Immediately, that attracted the attention of a whole raft of competitors," McCarron said. "There's a design frenzy going on right now in that space."