Intel Corp on Wednesday took the wraps off next-generation technology that crams more transistors onto microchips, hoping it will help the chipmaker catch up in a red-hot tablet and smartphone market.

Intel expects to start production of its first PC and server chips using new technology -- code named Ivy Bridge -- by the end of 2011 and said that it would also make new processors for mobile devices.

The cutting-edge technology -- which Intel says breaks new ground by moving away from flat circuitry to a three-dimensional model -- may pose a threat to rival ARM Holdings, which dominates the mobile device market.

Shares of Intel rose about 2 percent while ARM's shares closed down 7.3 percent at 5.58 pounds in London.

But analysts say the jury is still out on whether the PC market titan can make immediate inroads into ARM's backyard.

With the convergence of PCs, smartphones and tablets, clearly Intel wants to get out of its core PC market. The issue is 'Can they come up with a processor that is sufficiently power efficient to be competitive in the mobile computing space?' said Adrien Bommelaer, an analyst at Matrix.

They are coming out with a chip that they think has a 50 percent power-saving compared to their previous generation on 32 nanometer, so it is a great step in the right direction.

But is it enough? I don't know. Remember ARM is also improving its own power efficiency.

Santa Clara, California-based Intel's processors are the brains in 80 percent of the world's personal computers but the world's biggest chipmaker has failed to get into gadgets like Apple's iPad.

THE GOLD STANDARD

Energy-efficient chips licensed by ARM that conserve smartphone batteries are favored by Apple and its competitors, and are the industry standard on mobile devices at the expense of Intel.

Intel said its new 22 nanometer (nm) chips would offer higher performance -- lower line-widths mean more transistors and faster speeds -- and consume less electricity than its current 32 nm chips.

To extend its lead in manufacturing technology and help it catch up in the mobile race, Intel last month raised its capital spending plan for 2011 to $10.2 billion from $9 billion as it rushes to implement its 22 nm manufacturing as well as its next goal -- 14 nm.

Intel's cutting-edge manufacturing technology is far ahead of other chip companies, giving it a major advantage in building fast and efficient processors.

Since the 1960s, Intel and other semiconductor companies have sunk billions of dollars into research and development, letting them double the number of transistors they can squeeze onto microchips every two years, and paving the way for smaller and faster electronics gadgets.

The costs of developing and building ever more advanced manufacturing technology is snowballing and has become prohibitively expensive for many players. But Intel has the deep pockets to continue pushing its technology roadmap, analysts say.

Intel's scientists and engineers have once again reinvented the transistor, this time utilizing the third dimension, said Intel CEO Paul Otellini in a statement.

(Editing by Derek Caney, Bernard Orr)

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