CONSIDERING THAT so many personal computers come with a sticker proclaiming there is "Intel inside", it is surprising that this dominance does not extend to mobile phones.

In fact, mobile phones should sport "ARM inside" stickers, as about 98 per cent of handsets globally use chips based on designs by Britain's ARM Holdings, which are known for their economical use of battery power.

Although the US chipmaker has barely any presence in this huge market, which far eclipses PCs in terms of unit sales, chief executive Paul Otellini says this is about to change. He claims Intel chips are likely to be included in high-end, internet-enabled mobile phones as the phone and computer industries increasingly converge.

Two years ago, Intel appeared to throw in the towel on the mobile sector when it sold its handset chip operations to Marvell. Now it is back with a new brand of small, low-energy Atom processors aimed at challenging ARM's dominance.

Otellini says Intel will only target the top 10 or 20 per cent of mobile handsets, which should be highly geared around internet access. He says the company's experience of designing chips that can run internet applications should allow it to succeed where it has previously failed.

"As laptops get smaller and phones get smarter, it is difficult to say what is a laptop and what is a handset. You only have to look at the iPhone today to see where the industry is headed. In 10 years' time, every phone will be like an iPhone."

He believes Intel's chips will bring a consistency to the mobile internet. "Everyone implements ARM's designs differently. There is no set of software that runs consistently on ARM. Even multiple generations of chip by the same chipmaker run differently."

This means handset manufacturers and mobile phone operators are forced to make constant tweaks to software to get the internet to display properly on mobile phones.

"The idea of constantly having to rewrite the internet to work on these machines is nuts," Otellini says.

In contrast, he claims the Atom chip can run internet programs more easily, because the internet has already been optimised to run on Intel-based machines.

"No one thinks of the internet as a compatibility issue, but it is similar to problems with operating systems. Flash, Java, Ajax, all those programming languages assume there is an Intel-based machine at the end of the chain," he says.

He is undaunted by the company's past failure in the mobile sector. "Some people view persistence as a positive. Last time we didn't know what we were aiming at - was it smartphones or something else? This is aimed at devices with the full internet, not smartphones."

However, analysts and industry rivals have remained sceptical of Intel's ability to win market share, and ARM has said the power consumption advantages of its chip designs are still ahead of Intel.

Intel will first include the Atom chips in a new category of "mobile internet devices", halfway between a smartphone and laptop in size, expected to start selling this year. It will then move on to internet-enabled phones.

"We are creating a category of devices that doesn't exist at the moment, that is why there is appropriate scepticism, but we have already moved on from last year where you would have said 'that is impossible', to this year saying 'hmm, that is interesting'."

At the same time, Intel is pushing WiMax wireless broadband technology as a challenger to the 3G mobile phone network to deliver mobile internet connectivity.

WiMax is seen as a way to deliver broadband internet coverage in areas of the developing world where it is difficult or uneconomical to build a wired internet network. However, it could also be used as an alternative method to deliver data to mobile handsets.

Apple's iPhone, for example, allows users to download music using a wi-fi connection, the predecessor to WiMax, which covers a smaller area.

Intel is working with Clearwire and Sprint to create a mobile WiMax network across the US. Otellini says he expects to cover "tens of millions" of subscribers in 2008, and more than 100 million the next year.

He also says he wants to retain an interest in Nand memory chip products, which are used in mobile phones and portable media player, despite their precipitous fall in price recently.

"Nand is a platform play for us. It is used both at the low end of smartphones and the high end of servers. It is a way to manage power and save battery life."

However, he adds that the Nand operations, which have been put into a joint venture with Micron, would have to reach sustainable profitability. He declines however o specify a timescale in which the venture needs to reach profit. - (Financial Times service)