Intel Atom: Intel Makes Its Smallest Chip Ever

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Martin Reynolds, a vice president at Gartner Inc., says that while the Atom won't rival desktop chips for speed or power, it's certainly quick enough to do what it was designed to do -- and, he adds, it's "really cheap." Its teeny transistors allow Intel to pack memory and basic system controllers into one package. "That means all the complicated work you do on a circuit board can now occur in a chip. This will make the devices smaller."

Teeny transistors mean that "all the complicated work you do on a circuit board can now occur in a chip," says one analyst. "That will make handheld devices smaller."

It seems obvious today that any chip would be a slam dunk if it improves battery performance while offering the full mobile Internet. But at Intel, the decision to develop the Atom was controversial. It's much easier to improve an existing product line, after all, than to create a new chip from scratch, and in 2004, when the project began, the handheld market was just emerging. The Atom would siphon billions of dollars in development costs from other programs and require hundreds of engineers working full time for four years.

Once the commitment was made, however, a series of new engineering and design features were built into the chip. Foremost among them was a special type of metal transistor gate to replace the tried-and-true silicon. The new gates drastically cut down on the inefficiencies (read, missed signals) that cause information leakage and therefore extra battery drain. But they also set up a nasty obstacle for competitors such as AMD that have not yet found a way to achieve the Atom's efficiency. "Without metal gates, they can't match the power of Atom," Reynolds says. "Intel has a couple of years before AMD can enter the space."

While the Atom was developed specifically for the handheld market, Intel discovered along the way that the chip could also power a whole new category it dubs "netbooks" -- mini PCs that are lightweight, cheap (as low as $250), and capable of running basic PC functions such as word processing, email, and Web surfing. Intel's Eden views the netbook as a disruptive technology that could create whole new markets: Kids as young as 5 will play on netbooks, he predicts, and why should students haul 12 pounds of books to school when they could simply carry a 2-pound computer? Emerging economies in China and India alone could mean a huge opportunity as the Internet becomes a staple of life in those countries -- especially since the Atom will power not only Intel's Classmate PC (the controversial free-market foil to the One Laptop Per Child machines developed by MIT's Nicholas Negroponte) but also dozens of other cut-rate contenders. Here in the United States, Mike Feibus, an analyst with TechKnowledge Strategies, sees the price for some Atom-powered netbooks dropping below $199 by Christmas 2009, a price low enough to close the gap between PC haves and PC have-nots. Intel estimates there will be about 50 million netbooks in circulation by 2011. And because the Atom packs oomph without getting superheated, there's no need for bulky fans to keep the insides cool, which means the chip could soon be driving everything from handheld gaming machines to GPS gizmos, e-book readers, Internet tablets, and pocket video and music devices -- all juiced with mobile Internet capability.

Perversely, Intel's temporary technological advantage may mean trouble down the road. While Atom sales are jamming, according to the company, Gartner's Reynolds calls it a "price-point enabler -- it could burn Intel by driving the margins out of the [chip] market. If everyone switches to Atom, Intel's revenue would go down, especially if it starts leaking into the notebook-and-desktop market. That could hurt."

Eden doesn't think that will happen. "Let's not fool ourselves," he says. "If you want to manipulate pictures, if you want to look at high-definition video, don't do it on the Atom. It is not fit for this."

Because the Atom isn't Intel's fastest or most powerful chip. And that's precisely the point.

Contributing writer Adam L. Penenberg's book about viral loops, based on his May Fast Company cover story, will be published by Hyperion in Fall 2009.