Arm and Texas Instruments are set to take on Intel's new Atom processor by offering their chips in mobile Internet devices, such as mini-laptops.

The two companies are already strong players in smartphones, but their products don't appear yet in mini-laptops like the Asus Eee PC, which is based on an Intel chip. But that will change by the end of this year, according to Seshu Madhavapeddy, general manager of TI's Mobile Internet Devices division.

He said that this year several MIDs in all form factors - including mini-notebooks - will be based on TI's OMAP 3 processor, which uses an Arm core. Madhavapeddy would not name any of the manufacturers, however.

If those devices appear it will escalate the competition between Arm and TI on the one hand, and Intel, which coined the MID name and is hawking its Atom processor as the best chip for those devices. Indeed, as Intel tries to go "downmarket" with Atom and play a bigger role in the smartphone business, Arm, TI and other phone chip companies are hoping to move upmarket and challenge Intel in small laptops.

"The OMAP 3 is great for all devices that need wireless connectivity, a full web browsing experience and low power consumption," Madhavapeddy said, referring to TI's latest processor. "Whether it has a 3.5-inch screen or an 8-inch screen is irrelevant."

Arm and TI say their experience with the low-power and wireless requirements of mobile phones make them able competitors in the MID market. Arm's chip designs are generally less powerful than Intel processors, but Bob Morris, director of marketing for Arm's mobile computing segment, argued that processors based on Arm's new Cortex-A8 core use less power than Intel's Atom.

When a user puts a device into sleep mode, Morris said, the Cortex-A8 saves its last contents to external DRAM, which allows the Arm chip to shut own completely, conserving power. He claimed that Intel's Atom processor consumes a trickle of energy even when devices are asleep.

Arm will release an updated design, the Cortex-A9, next year, Morris said. It will be a multicore design, allowing manufacturers like TI to use up to four Arm cores on a single chip, he said.

While Arm-based chips are already established in small tablet devices like Apple's iPod Touch and the Nokia N800, Intel has the advantage in mini-notebooks. Besides having an early lead with the Eee PC and other products, device makers who use Intel chips have more choices for software, including the Windows XP OS, which doesn't currently run on Arm devices.

TI is focusing its efforts on Linux, Madhavapeddy said. He would not comment on whether the company had tried to run Windows XP on its OMAP processors.

TI's OMAP 3 has four processor cores on a single chip, including the Cortex-A8 and three discrete cores for multimedia, graphics and image processing. That allows the chip to play high-definition video or render 3D images for gaming, while fitting into small devices, Morris said.

Arm now sees Intel as a more direct competitor, and in response is trying to build a more complete software ecosystem around its products, Morris said. MIDs typically include PC-like functionality, including a full Web browser and productivity tools, despite their small size.

The rivalry may not end at handheld devices, either. Morris said server manufacturers looking to reduce power consumption in their products have approached Arm about possibly using its chip designs in their servers.

(Dan Nystedt in Taipei contributed to this report.)