Intel partners with LG on mobile Internet devices

BARCELONA--Intel announced here Monday at the GSMA Mobile World Congress that LG Electronics will use its latest generation technology to build a new class of device called mobile Internet devices, or MIDs.

Specifically, Intel and LG will work together to build these new devices using a processor that Intel has code-named Moorestown. The devices will also use a version of the Linux open-source operating system called Moblin. The LG device is expected to be one of the first Moorestown designs to market. And Intel has said that devices using the new Moorestown chips will hit the market by 2010.

Intel and LG have already been working closely together on other products. In the fourth quarter last year, LG launched a Netbook using Intel's Atom processor. And LG also ships full-fledged notebooks using Intel's Core processor.

Now, the companies are working on a new class of product that are mini-computers that can also be used to make phone calls using a wireless Internet connection. Intel sees the category of product as something that is somewhere between a smartphone, like the Apple iPhone, and a Netbook, a scaled-down version of a notebook computer.

As the global economy continues to deteriorate, Intel, like many other large companies, is looking for growth markets. The company's bread-and-butter PC processor business is suffering as people stop buying desktop computers.

Intel sees mobile devices, and specifically the MID market, as an important area for growth. While the overall cell phone market was down about 12.6 percent worldwide in the fourth quarter, according to IDC, smartphones were actually up about 22.5 percent.

To date, Intel hasn't really played in this growing market. Instead, other players, such as ARM, Qualcomm, and Texas Instruments, have divvied up considerable market share in the cell phone market.

But Intel wants a piece of the pie. So the company has been pushing this new category of device. Intel argues that consumers need a device that's more powerful than a smartphone but not as bulky as a Netbook or laptop. The idea is that consumers who buy a MID could use it to watch high-definition video, make phone calls using the Internet, or download information from the Web while on the go.

Not surprisingly, Intel's vision of a MID is exactly why many people want to buy a smartphone like the iPhone. And this is essentially the conundrum that Intel faces. It has to convince consumers that they need to spend a few hundred dollars or more on an additional device.

But since this mobile device will also require wireless Internet access, Intel is also tacitly asking consumers to sign up for yet another wireless service plan. Of course, these devices will likely have Wi-Fi, but Wi-Fi isn't everywhere. And if someone wants a device with ubiquitous coverage, he'll have to pony-up an extra fee for a service plan.

So far, wireless operators have done a poor job of providing people with a single subscription for multiple devices. Some carriers allow certain smartphone devices to be used as modems for laptops that essentially share the same data service. But some devices, like the Apple iPhone, can't be used in this way, which means that consumers who want wireless 3G Internet access on their laptop and on their phone have to subscribe to separate services.

Data service for laptops and Netbooks service generally costs about $60 a month. Meanwhile, carriers are also charging smartphone users an additional $30 a month on their bill for unlimited Internet access. All told, a single consumer could have to come up with about $90 a month just for mobile Internet access on two devices. Compare this with the $30 a month that DSL broadband subscribers pay, which allows them to connect multiple devices at much higher speeds to the Internet.

Most likely when these MIDs rollout, mobile operators will have a more affordable plan in place. Operators, such as AT&T and Sprint Nextel have already expressed interest in rethinking data plans to accommodate more devices that will access the Internet wirelessly. But one thing is certain. An expensive data plan could hurt MIDs before they even get out of the gate.