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Intel could be left behind by march toward mobile

(MoneyWatch) LG Electronics has reportedly begun to design its own mobile processors. The South Korean electronics giant, one of the world's five largest vendors of mobile devices by unit sales, has 900 engineers working on chip designs for smartphones and Web-enabled TVs, according to the Korea Times.="http:>

LG has taken a lesson from both Apple (AAPL) and Samsung. Creating its own chips gives the company greater control over the parts it needs for its products. The result may be good for LG, its designers and the company that will ultimately physically manufacture the chips, but it is bad news for Intel (INTC). The chipmaker's dominance has been based on making products for PC, while the world is increasingly moving toward mobile computing. For Intel, the question is whether that shift is too far along for it to adapt.

There was a time when Intel and personal computing were synonymous. But the days when the company's x86 architecture partnered with Microsoft (MSFT) Windows to power the world's desktops and laptops are waning. The latest wave consists of smartphones and light tablets that have a long battery life and that deliver the functionality that people need.

In her year-end report on trends in mobile, Kleiner Perkins venture capitalist analyst Mary Meeker, well regarded in tech circles for her analyses, noted that 13 percent of Internet traffic now comes from mobile devices. Only two years ago, that number was 4 percent. In some parts of the world, mobile traffic has actually outpaced Web usage coming from desktops. In India, for example, mobile represents 60 percent of all Internet traffic.

Meeker estimates that by the end of 2013 unit sales of mobile devices running either Google (GOOG) Android or Apple's iOS will outsell Windows devices by almost 2.5 times. In 2015, the difference will be a factor of 4.25, she predicts, with PC sales remaining largely flat. Even now, 30 percent of U.S. adults own either a tablet or an e-reader.

Of course, flat PC sales still means on the order of 400 million units a year. However, even that enduring business is likely to move away from Intel's architecture. After all, how long before Apple moves many of its desktops and notebooks to its own chips? How long before Microsoft provides a full version of Windows, not just Windows RT, for non-Intel chips that manufacturers use to save money and control availability? The latter was once a tool Intel could, and did, use to maintain product margins and control over its customers.

These factors will put increased pressure on Intel's profits and revenue, which in turn will cause investors to question the company's current market value.

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