SAN DIEGO

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As the PC shrinks in size, it is on a collision course with the multifunction cellphone. Many expect the resulting impact to transform both devices and all the companies that make them. The new smartphones, always-on portable Internet devices that are part cellphone, part computer, change the rules of the game in computing because computing speed — at which Intel excelled — is no longer the most important factor. For a cellphone relying on a small battery, how efficiently a chip uses power becomes more important.

The new mobile world represents a special challenge for Intel, which until four years ago ignored the issue of increasing power consumption in its flagship X86 chips, which have been the PC industry standard for almost three decades.

Other chip makers have not ignored power consumption. Just this month at Computex, a huge computer and consumer electronics trade show held each year in Taiwan, the Silicon Valley graphics chip maker Nvidia demonstrated a small mobile computer that worked five times as long on a battery as a similar portable machine powered by Intel’s most recent low-power chip.

Qualcomm and Nvidia share a chip design licensed from a relatively tiny British chip firm, ARM Holdings. ARM has had a big impact on the communications world. Its processors sell for substantially less than Intel’s more powerful X86 chips and are far more numerous: they are standard for the cellphone industry. Cellphones outsell PCs by about five to one.

“This battle is being fought in ARM’s backyard, not Intel’s,” said Michael Rayfield, general manager of Nvidia’s mobile group.

In addition to Qualcomm and Nvidia, there are more than 200 licensees of the ARM processor design, including major chip makers like Marvell and Texas Instruments. Together, they supply the more than 1.1 billion cellphones, many of which use multiple ARM chips. The chips are also used in a growing array of special purpose consumer electronics like G.P.S. navigators and set-top TV boxes.

Dominating the large and growing cellphone market is only half the battle. Both the X86 and ARM camps are eagerly eyeing a new market known within the consumer electronics industry as M.I.D.’s, or mobile Internet devices. They are betting that this year represents the beginning of a boom in a new class of computing device — things like shrunken laptops called netbooks, personal G.P.S. navigators and handheld game systems, as well as an expanding array of idiosyncratic gadgets that connect wirelessly to the Internet for every conceivable purpose. For example, at Computex, one company displayed a handheld device intended solely for people looking to car-pool.

Outside the United States, the less expensive M.I.D. computers are expected to expand penetration of computers into new markets. In the United States and Europe, however, there is a debate about whether the new machine will remain a niche category.

Anand Chandrasekhar, a vice president and manager of Intel’s mobile platforms group, said he expects portable computers to be much like bicycles. Not only will people use different ones for different applications — like road bikes and mountain bikes — but they will also outgrow them.

“As a child, I had a bike for my size, and as I grew, my bike changed,” he said.

Intel, the world’s largest chip maker, is now well aware of the threat from ARM. It is focusing vast resources on the low-power microprocessor market and says it is catching up quickly in power efficiency with its ARM competitors. This month, the first netbooks using a new Intel chip, the Atom, began to be shipped. Intel says more than 30 products will use the Atom.

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