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Chipmakers push vision of networked gadgets

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CIOL Bureau
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Scott Hillis

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SAN FRANCISCO: When people think of consumer electronics, the word "semiconductors" probably doesn't spring immediately to mind.

But makers of computer, memory and communication chips are a major force driving the visions of networked gizmos and portable digital media, key themes at this year's Consumer Electronics Show, the year's biggest gadget expo.

While it is consumer brands like Apple, Sony or TiVo that ultimately attract buyers, their electronic wizardry is enabled by the slivers of silicon that process, store and transmit everything from songs to spreadsheets.

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Once content to maintain a lower profile at CES, chipmakers are seeking more of the extravaganza's limelight as part of efforts to move beyond just chips and into "platforms" -- packages that include almost everything needed to make a product: chips, software and product blueprints.

"We think 2006 is really the beginning of this convergence that we've been talking about for so long," said Hal Speed, a marketing architect for Advanced Micro Devices Inc., the No. 2 maker of computer processors.

"The argument for the past few years has been: are PC companies or electronics companies going to win? AMD is saying it's both. We in the PC industry can work with the electronics industry collaboratively to get the best experience."

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On Thursday, Paul Otellini, chief executive of Intel Corp., outlined the top chipmaker's new "Viiv" program aimed at finally bringing the PC out of the den and into the living room by giving the machines a consumer-friendly make-over.

"In order for us to deliver this we have to integrate the big-screen capability, the PC capability, and the Internet experience. This is a combination of hardware and software that delivers a new media experience," Otellini said.

Intel and Internet media firm Google Inc. also said they would integrate Google's video search service into Viiv, bestowing the platform with some of the shine from one of the hottest companies around.

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"With the explosion of digital entertainment choices, consumers will need simple, easy ways to locate the content the want and easily play it when they want," Kevin Corbett, Intel's vice president of its digital home group, said in a statement.

Otellini's CES keynote came a day after AMD took the wraps off its own plan, called AMD Live, to bridge the gap between the PC and the TV by working to merge broadcasts with some Internet features.

"These things will show how they are working to make PCs fit better into the home entertainment universe," Dean McCarron, head of semiconductor market analysis firm Mercury Research, said of the Intel and AMD programs.

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This year's CES goes well beyond the PC.

"While penetration of low-end PCs and handsets will continue to be a major trend this year, we believe the ramp of new technologies and innovations will be the key growth driver for the industry," said Michael Masdea, chip analyst for Credit Suisse First Boston.

Chip companies once known mainly for corporate products are now salivating over a booming consumer market.

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One example is Broadcom Corp., which moved beyond its core networking business in a big way last year when Apple Computer Inc. picked its video processor to power its latest iPod media player.

"Broadcom is well-positioned to benefit from extending its expertise in high-speed data transmission to emerging high-definition video, voice and audio applications within the enterprise and for consumers," said Ruben Roy, an analyst with Pacific Crest Securities.

With high-definition and digital television taking off, Texas Instruments Inc. is pushing its DLP technology, making it one of the few semiconductor makers to market directly to consumers.

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Texas Instruments and competitors like wireless technology company Qualcomm Inc. and Freescale Semiconductor, a maker of chips for mobile telephones, are also scrambling to deliver mobile television, another hot area.

"Cellphone TV is a significant opportunity for the chip industry by significantly increasing the silicon content on the handset," Masdea wrote in a recent research note.

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