--Battle is intensifying in the computer processor chip market ahead of the launch of new Windows 8 operating system
--PC processor giant Intel and ARM Holdings, which designs processors for smartphones and tablets, are expanding into each other's market
(Rewrites throughout, adding comments from ARM Holdings)
By Lorraine Luk
TAIPEI--Behind personal computer makers' race to prepare tablets and PCs that run on Microsoft Corp.'s (MSFT) next-generation Windows 8 operating system, another battle is intensifying among companies that design processor chips powering those devices.
On one side is Intel Corp. (INTC) of the U.S., which has long dominated the market for processors used in PCs and computer servers. On the other side is U.K.-based ARM Holdings PLC (ARMH), which has risen to fame with its low-power mobile processors that are used in most smartphones and tablets, including Apple Inc. (AAPL) products.
Their battle is likely to escalate with Microsoft's latest OS makeover, as Windows for the first time becomes compatible with ARM processors with a version of Windows 8. At the same time, Windows 8, which has an interface optimized for touch-screen use, may give Intel an opportunity to gain more presence in the tablet market.
ARM and Intel have been trying to expand in each other's market, with ARM chips making a push into PCs and servers while Intel increases its focus on smartphones and tablets.
ARM Chief Operating Officer Graham Budd said in an interview Tuesday that the first ARM-based computer server will hit the market by the end of this year, and the company aims to grab as much as 10% of the server chip market by 2016. He said that Dell Inc. (DELL) and Hewlett-Packard Co. (HPQ) are testing server chips designed by ARM.
The traditional PC industry, where Intel processors remain dominant, has seen only modest growth in recent years, with consumer demand for gadgets shifting more to tablets and smartphones powered by ARM processors.
ARM doesn't build chips itself but designs processor technology that it licenses to companies such as Qualcomm Inc. (QCOM) and Nvidia Corp. (NVDA).
To secure its own market, Intel has been promoting Ultrabooks, a category it invented last year for a new breed of thin, lightweight laptops. Intel makes the key processors that power Ultrabooks.
Ultrabook sales have so far failed to gain momentum, but Intel expects this still-nascent market segment to find a broader audience when PC makers later this year release touch-screen Ultrabooks running on Windows 8.
To create a new market for touch-enabled Ultrabooks, Intel said Tuesday that it has agreed to help fund several touch-screen makers' investment on additional production capacity.
Intel said it has reached financial agreements with four Taiwanese touch-screen makers--Wintek Corp. (2384.TW), TPK Holding Co. (3673.TW), HannsTouch Solution Inc. and Cando Corp. (8056.OT). Intel declined to give details on how much money it will provide or the specific costs it will help shoulder.
"Intel believes that touch capability is a key component to the Ultrabook experience," said senior vice president Tom Kilroy in an interview this week.
Intel is counting on Windows 8 to help stimulate demand for Ultrabooks as well as other PCs in the second half.
ARM, meanwhile, now sees an opportunity to work with traditional PC makers that have long been using Intel processors, thanks to Windows RT, a version of Windows 8 that supports ARM-based processors.
Taiwanese PC maker Asustek this week showed a Windows RT-based tablet with an ARM-based processor made by Nvidia, and said it plans to launch it in the fourth quarter.
Ujesh Desai, Nvidia's vice president of product marketing, said in an interview Tuesday that the new Windows operating system could also enable the company take on Intel in the market for Ultrabooks.
Mr. Desai said prices for thin, lightweight laptops that run on the Windows RT operating system with Nvidia's ARM-based Tegra processors could be as low as $499. The average price for Ultrabooks with Intel processors is about $800, and Intel is trying to lower the price to $699 by the end of this year.
-Juro Osawa contributed to this article.
Write to Lorraine Luk at email@example.com