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Intel, the world’s largest chipmaker, will sell Atom processors to Nokia will work with Nokia on mobile devices, marking the biggest breakthrough in Intel’s expansion into the phone market, report the companies. The collaboration may lead to Atom chips on Nokia phones but nothing definitive was said in today’s press release.

Intel’s deal with Nokia, announced today, will reportedly supply 45 nm “Moorestown” Atom processors to Nokia. Due by 2010, Intel says Moorestown has 10x idle power reduction compared to today’s Intel Atom-based platform. It integrates a 45nm Intel Atom™ processor core, graphics, video and memory controller, and a companion input/output (I/O) hub, codenamed “Langwell”.

Intel, whose microprocessors run more than 80 percent of the world’s personal computers, has struggled for about a decade to get a foothold in the market for mobile-phone chips. In 2006, Intel Chief Executive Officer Paul Otellini scrapped his predecessor’s $5 billion investment in chips for mobile devices, after the company was late to the market and failed to win enough customers.

Intel sold the ARM unit to Marvell for $600 million in 2006. Intel may have believed that their PC-compatible architecture could shrink fast enough to power smartphones. It has taken about four years — several generations in cellular time.

Even if they get just a piece of Nokia’s business, it’s a big deal, said Will Strauss, a Cave Creek, Arizona-based analyst for research firm Forward Concepts. Nokia is still the biggest cell-phone maker in the world. A greater potential impact may lie in Intel’s licensing of Nokia’s 3G HSPA technology, says PC Magazine. Intel’s chipsets already combine Wi-Fi and WiMAX technology, and a 3G component would serve as an additional bridge to connect client devices roaming between the two technologies.

It is highly likely that Nokia will use Intel’s Moorestown and Medfield system-on-chip devices, says Xbit Labs. Moorestown, made using 45nm fabrication process, may power mobile Internet devices and communicators, whereas Medfield, which are to be made utilizing 32nm process technology, may find home inside Nokia’s smartphones due in 2011. Intel is saying that Moorestown will be available in 2009 or 2010, though the second half of 2009 appears increasingly likely.

Intel is challenging ARM-based processors from Texas Instruments, the largest maker of processor chips for mobile phones, and San Diego- based Qualcomm. Qualcomm supplied the main processor in the first phone using Google’s Android OS.

The effort also includes cooperation in several open source software initiatives for use in the Moblin (Intel) and Maemo (Nokia) platforms, which will deliver Linux-based operating systems for handheld devices. Hosted by the Linux Foundation, Moblin is an optimized open source Linux project for visually rich Internet media on Atom-based devices, including MIDs, netbooks, nettops, in-vehicle infotainment systems. Maemo is used on Nokia Internet Tablets. Maemo 5, which was announced last year, is expected to be released at the end of 2010 and will have 3G data connectivity. It will run on devices with TI’s ARM-based OMAP3 chips.

The LG Electronics MID device, due in 2010, is predicted to be “one of the first Moorestown designs to market,” according to the companies. The Mobile Internet Device will run Linux-based, Moblin V2 that will add cellular voice capability, says Intel. The new Moblin v2 beta, which came out earlier this month, is focused on NetBooks and MIDs. It’s been qualified on devices from Acer, Asus, Dell and MSI.

Ultra-Mobile PCs, by definition, run Windows. But running Microsoft Windows on a Smartphone or UMPC is not the compelling prospect it may have appeared 5 years ago.

Atom’s chief advantage is that it can run PC applications, unlike ARM-based devices. But current Atom processors require far more juice than ARM, making it impractical for most handheld devices. The Moorestown shrink may change all that.

On the other hand, with breakaway monster hits like the iPhone App store, and open source platforms like Android, the need to run PC apps on a handheld may be less important. Channel Web has Five Reasons Android Is Changing The Smartphone Game.

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