For Chip Makers, the Next Battle Is in Smartphones

The semiconductor industry has long been a game for titans.

The going rate for a state-of-the-art chip factory is about $3 billion. The plants typically take years to build. And the microscopic size of chip circuitry requires engineering that practically defies the laws of physics.

Over the decades, legions of companies have found themselves reeling, even wiped out financially, from trying to produce some of the most complex objects made by humans for the lowest possible price.

Now, the chip wars are about to become even more bloody. In this next phase, the manufacturers will be fighting to supply the silicon for one of the fastest-growing segments of computing: smartphones, tiny laptops and tablet-style devices.

The fight pits several big chip companies — each trying to put its own stamp on the same basic design for mobile chips — against Intel, the dominant maker of PC chips, which is using an entirely different design to enter a market segment in which it has a minuscule presence.

Consumers are likely to benefit from the battle, which should increase competition and innovation, according to industry players. But it will be costly to the chip manufacturers involved.

“I worry about that,” said Ian Drew, an executive vice president at ARM Holdings, which owns the rights to the core chip design used in most smartphones and licenses that technology to manufacturers. “But ultimately, these chip makers are all pushing each other, and if one falls over, there are still two or three left.”

Intel, based in Santa Clara, Calif., has long been held up as the gold standard when it comes to ultra-efficient, advanced chip manufacturing plants. The company is the last mainstream chip maker to both design and build its own products, which go into the vast majority of the PCs and servers sold each year.

Most other chips, for items as diverse as cars and printers, are built by a group of contract manufacturers, based primarily in Asia, to meet the specifications of other companies that design and market them. Traditionally, these companies, known as foundries, have trailed Intel in terms of manufacturing technology and have handled chips with simpler designs.

But with mobile technology, an expensive race is on to build smaller chips that consume less power, run faster and cost less than products made at older factories.

For example, GlobalFoundries plans to start making chips this year in Dresden, Germany, at what is arguably the most advanced chip factory ever built. The initial chips coming out of the plant will make their way into smartphones and tabletlike devices rather than mainstream computers.