UPDATE 1-TECHSHOW-Intel unveils chips for use in gadgets

(Recasts, adds more CEO comments, analyst, background)

By Scott Hillis

LAS VEGAS, Jan 7 (Reuters) - Intel Corp (INTC.O) Chief Executive Paul Otellini unveiled advanced microchips for portable gadgets and home electronics on Monday, eyeing a new growth opportunity as its main computer processor market matures.

As the largest chipmaker, Intel's microprocessors power some 80 percent of the world's personal computers, but Otellini made scant references to PCs, which the company has pushed as digital media hubs at past CES showings.

"We're now in the midst of the largest opportunity to redefine consumer electronics and entertainment since the introduction of the television," Otellini told the Consumer Electronics Show.

Otellini focused on consumer devices, describing for the first time a new chip aimed at electronics such as set-top boxes, media players and televisions.

Dubbed "Canmore", the new chip is to go on sale in the second half of 2008 and will consist of a processor like those used in personal computers but augmented to handle high-definition video, surround sound and 3D graphics.

"The challenge for Intel is always to find high-volume applications that require lots of processing power," said Nathan Brookwood, principal analyst at Insight 64.

The emphasis on consumer gadgets comes as Intel has faced slowing growth in the PC industry. Its previous forays into electronics such as digital music players and chips for smaller devices have fizzled, while other moves such as its backing for the Wi-fi wireless technology have helped open up new markets.

"If anybody knows how to grow a new segment, it's Intel and when they've gotten into trouble is when they've strayed from their roots," Brookwood said.

Intel competes mainly with Advanced Micro Devices (AMD.N), the second-biggest maker of PC processors. The new areas targeted by Otellini pit the company more squarely against diversified chipmakers such as Texas Instruments (TXN.N), Broadcom (BRCM.O) and South Korea's Samsung Electronics (005930.KS).

Also later this year, Intel plans to ship "Menlow", its first platform for mobile devices optimized for Web access, Otellini said. At the heart of the platform is a chip called "Silverthorne" that is five times smaller and uses 10 times less power than similar chips sold two years ago.

Otellini said future devices will be capable of feats such as helping travelers instantly translate signs and speech. Video games and virtual worlds eventually could be controlled by cameras that sense a user's body movements.

But he cautioned that Intel and others needed to make chips even smaller and more efficient, and that Web access needed to get faster and more widespread. Hardware and software makers also needed to figure out ways to help users access information and more natural ways to interact with devices.

"When you look at some of this stuff coming down the pike ... it's going to enable a lot of smaller handheld devices," Brookwood said. (Reporting by Scott Hillis, editing by Carol Bishopric & Jan Dahinten)