By Noel Randewich
SAN FRANCISCO (Reuters) - Intel Corp's <INTC.O> next-generation processors will begin shipping heavily from early 2011, as the top global chip maker launches an assault on the specialized graphics market dominated by rivals Advanced Micro Devices Inc <AMD.N> and Nvidia Corp <NVDA.O>.
Intel is seeking to drive future growth in a PC processor market it now dominates, while trying to get off the sidelines of a booming smartphone market. On Monday, chief executive Paul Otellini told reporters the company was "moving toward" getting its circuitry into two major brands of smartphones, without elaborating.
Another focus now for the company, which makes the microchip brains for 80 percent of the world's computers, is integrating two major acquisitions: security software specialist McAfee Inc <MFE.N> and Infineon Technologies AG's <IFXGn.DE> wireless chip division. Investors see both as crucial to Intel's efforts to make inroads into the wireless sector.
"We don't have any other large ones on the plate as we speak. Having said that, I'd be crazy to preclude that opportunity if the right company at the right price came along," Otellini told reporters on the sidelines of his annual Intel Developer Forum in San Francisco.
Mergers and acquisitions activity has surged in the tech sector, despite some concerns by investors about the strength of the current recovery.
Otellini told the forum that PC sales next year will again be driven by emerging markets such as China, after signs of weaker-than-expected demand for PCs in mature markets.
A SANDY BRIDGE ...
In August, Intel warned third-quarter revenue could fall short of its own estimates by more than $1 billion, reinforcing doubts about the strength of a technology sector recovery.
Intel and AMD shares surged as investors piled back into a chip sector battered since that warning. Intel was up 2.6 percent at $18.44. Analysts said investors were buying back semiconductor counters on positive economic news from China and Europe.
The company is now betting that Sandy Bridge, which it says combines more muscular graphics with its core processing power, will win over PC vendors and consumers next year.
"These second-generation Intel core processors will begin shipping in very high volume early in 2011," Otellini said.
Intel would like to see Sandy Bridge counted on to handle the mainstream graphics needs of computers built over the next few years, although PC manufacturers might continue to include specialized graphics chips in their products.
Some critics and rivals argue Intel's new chip will not satisfy high-end users, such as gamers willing to splash out hundreds of dollars separately for top-of-the-line graphics cards. That market is now dominated by Nvidia and AMD's ATI.
"Intel's been proclaiming the death of discrete graphics for years, but real GPUs (graphics processor units) just keep getting more important," said Nvidia spokesman Hector Marinez. "Today's visual computing applications -- like photo and video editing, playing games and browsing the web -- use a GPU for the best experience."
(Reporting by Noel Randewich; additional reporting by Alex Dobuzinskis; writing by Edwin Chan; editing by Gunna Dickson, Phil Berlowitz and Andre Grenon)