Advanced Micro Devices Inc this week will unveil a chip to let people download digital television programs from a set-top box to a portable media player, without a personal computer.
The strategy opposes Intel Corp's plan to pack the features into PCs that consumers would put in living rooms to replace digital video recorders, cable and satellite set-top television boxes and electronics. Advanced Micro, which also sells chips for media PCs, says consumers want the choice.
"If you can remove the PC from the necessary equation, all of a sudden your market potential goes up rapidly," Dan Shine, director of the Advanced Micro unit working on the project, said in an interview. The Alchemy chip translates various file types into high-definition video, removing the need for a PC, he said.
The US market for such devices will more than triple to US$45 billion by 2010 from US$12.8 billion this year, according to Sanford Bernstein & Co. PC sales growth has slowed to an average of 8 percent since 2000, from 21 percent from 1995 to 2000, according to researcher IDC.
Advanced Micro, based in Sunnyvale, California, may be on the right path. Intel, Microsoft Corp and PC makers like Hewlett-Packard have made few inroads in entertainment, said Richard Doherty, research director at consulting firm Envisioneering Group Inc.
"The race is on," he said. "But while Microsoft and Intel are trying, right now they are being eclipsed by the consumer electronics guys."
Shares of Advanced Micro gained 48 percent last year. Intel dropped 27 percent, making it the second-worst performing stock in the 30-member Dow Jones Industrial Average behind Merck & Co.
Advanced Micro will discuss the Alchemy chip at the Consumer Electronics Show in Las Vegas. Intel Chief Executive Officer Craig Barrett, Microsoft Corp founder Bill Gates and Hewlett-Packard Co CEO Carly Fiorina are among scheduled speakers.
Barrett will show entertainment center PC "concept models" that aren't commercially available and are meant to inspire designers, spokeswoman Laura Anderson said last week.
High-quality sound and video require advanced software and processing power, as do complex files obtained over the Internet and network connections, said Tai Nguyen, a Susquehanna Financial Group analyst in San Francisco.
"The look and feel of future products is going to be very different, but inside they are going to be PCs," Nguyen said.
Electronics makers reached the same conclusion and are adding functions to their products. Royal Philips Electronics NV, Europe's biggest consumer-electronics maker, has a system that can be connected to online music services via a wireless Internet connection without a PC.
To fight those devices, Intel and PC makers need to create media-center computers that are easier to use, Justin Rattner, head of Intel's microprocessor research, said in an interview on Dec. 2.