Intel is aiming for a slice of the smartphone market with a new chip with built in graphics.
The move would put it in direct competition with ARM, who design the majority of smartphone chips.
Intel will unveil its new chipset at its Developer Forum conference in San Francisco next week.
ARM has also launched a new chip that could potentially be five times faster than its current model.
Intel's new chip - code named Sandy Bridge - would result in smart phone visuals and remove the need for a separate graphics chip in computers.
A spokesperson for Intel told BBC news that the new chip was an important step for the company.
"[it is important] in the context of the continuing move to mobility as it allows for tighter integration between the CPU and graphics components, delivering better performance and power management," they said.
Although Intel currently sell single units that can cope with both graphics and processing, the sets comprise two separate chips: a central processing unit (CPU) and the graphic processing unit (GPU).
While power usage is not a major issue for desktop PCs, the problem becomes more significant for laptops and is a key issue for smartphones, where any extra power demand will shorten battery life.
Big and hot
Intel attempted to expand into the mobile computing market in 2008 when it launched its Atom chips. Although far smaller than Intel's usual chipsets, they still comprised a separate GPU and CPU and were still too large and power hungry to be acceptable to the smartphone market.
"This is part of Intel's desperate charge to get the size and power usage of their chips down," Alex Watson, editor of Custom PC magazine, told BBC News.
It is thought that smartphones will outsell PCs within in the next 12 months, due to the explosive growth in the popularity of the smartphone and a saturation of the PC market.
As such, this is a market that chip manufactures are keen to expand into.
"The vast majority of smartphones use ARM chips, a UK-based company spun out of Acorn Computers: the people who used to make the BBC Micro," said Mr Watson.
"They only design, rather than make the chips and then license them out. For example, the Apple A4 chip used in its iPad and iPhone 4 is ARM's design.
"ARM are probably one of the least known and most profitable companies in the IT sector," he added.
ARM is not resting on its laurels. The firm has just launched a new chip called the Cortex-A15 MPCore.
This new chip will run with a clock speed of 2.5 GHz, which could result in far faster processing speeds, with a minimal impact on power usage.
Its thought that it could mean iPads and iPhones could be five times faster, with some analysts saying ARM's new chip is "as significant to the smarphone market as the Pentium was to the desktop market".
"The pressure is really on Intel, because they are wedded to the technology that made them rich for the past 30 years," said Mr Watson
"They are determined to catch up using their existing technology, rather than starting again, but they are very short of time.
"There are almost a million smart phones being sold every day and Intel are not in a single one. If the firm is to remain viable, it needs a slice of that market."
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