Intel (Nasdaq: INTC) is looking to make another foray into the smartphone and tablet chip market. The company is launching a processor named Oak Trail that has been specifically designed to cater to the tablet market. Intel, the largest global producer of PC microchips, has been surprisingly dormant in this segment, and getting a foothold in the ever expanding mobile market will likely be a challenging task.

What's new
Last year, Intel introduced a smartphone chip known as Moorestown, but the chipmaker had little success as smartphone manufacturers complained the chips were too huge and power absorbing. Intel has since looked to correct those flaws, and it said the new Oak Trail chip will be less power consuming, will last longer, and will give much better performance.

The Oak Trail, like other Atom microchips, will cater to a wide number of operating systems currently used by tablet makers worldwide. It'll operate comfortably with Microsoft's (Nasdaq: MSFT) Windows platform as well as Google's (Nasdaq: GOOG) increasingly popular Android platform.

Chip market
Intel is about to enter a market, where, according to recent predictions, sales are on the verge of explosion. Analysts say that while PC sales will increase by only 10% compared this year, there's going to be serious upsurge in the tablet and smartphone market, and especially for tablets. Demand for tablets is expected to rise four times by the end of the year, whereas smartphone sales are expected to increase by at least half. So if you wanted to join the tablet or smartphone sector, you wouldn't find a better time than right now.

But are they a little too late to jump onto the tablet bandwagon? At present, U.K.-based ARM Holdings (Nasdaq: ARMH) currently dominates the smartphone and tablet chip market. Manufacturers such as Qualcomm (Nasdaq: QCOM) and Texas Instruments (NYSE: TXN), who license ARM's technology, have begun a price war of their own and are continually looking to innovate and change -- at lower price points than the competition. Breaking into this competitive market is going to be a very daunting task for a new player like Intel.

Not long ago, Intel was dealt a major blow when Nokia (NYSE: NOK) decided to part ways and shift to Microsoft's Windows operating system. Previously, Nokia was operating a system called MeeGo, which it incidentally helped co-create with Intel, but at the last moment decided to go Microsoft's way. This was good news for Intel's competitors as the previously inaccessible Nokia market opened up. However, with a new chip and a new segment to latch onto (tablets), Intel is seemingly back on the right track.

Some respite
Despite missing the early boat on tablets, and even smartphones, Intel still remains positive in its outlook. It is hoping to introduce new processors each year from now, each being significantly more advanced than the other and more importantly, at least for buyers, less expensive. It is also going to launch a chip meant for smartphones later this year called Medfield. Intel looks set to take the handheld market by storm, but only time if the market will have it.

The Foolish bottom line
Intel has definitely come in well prepared this time. But, given the clearly defined and confined nature of the market and the problems at hand, it is difficult to predict how much of an impact Intel will be able to make. I'm rather skeptical about how well the company is going to perform, at least in the short term. Only time will tell.

Sarosh Nicholas doesn't own any shares of the companies listed above. Google, Intel, and Microsoft are Motley Fool Inside Value picks. Google is a Motley Fool Rule Breakers recommendation. Intel is a Motley Fool Income Investor pick. The Fool owns shares of and has bought calls on Intel. Motley Fool Options has recommended a diagonal call position on Intel. Motley Fool Options has recommended a diagonal call position on Microsoft. The Fool owns shares of Google, Microsoft, QUALCOMM, and Texas Instruments. Alpha Newsletter Account, LLC owns shares of Microsoft. 

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