The cut-throat market for the chips that power smartphones and handhelds just got more competitive. In the past few days, no fewer than five semiconductors companies, including Samsung, ST Microelectronics, Texas Instruments, Qualcomm, and, yes, even Nvidia, have all announced new application processors:

• Nvidia APX 2500 press release
• Qualcomm QST-series press release
• Samsung S3C6410 press release
• ST Microelectronics Nomadik STn8820 press release
• TI OMAP3440 press release

I won’t spend a lot of time detailing the specs of each of these. (I’ve included some links to more detailed analyses of several at the end of this post.) Instead, I want to highlight some of the trends in these mobile chips, which don’t get quite as much attention as all the new eye-candy from Sony Ericsson, Samsung, LG and others announced at GSMA Mobile World Congress in Barcelona this week, but are growing in significance.

Traditionally, cell phone design has been dictated by the telecommunications companies. They have long design cycles (in other words, it takes a long time to get a handset off the drawing board and into production), use low-cost components and little memory, and are geared primarily for making and receiving calls. Data services have been slow to catch on, especially in the U.S., because of a poor user experience and high prices.

Apple’s iPhone upset this industry dynamic. Even in comparison to users of other smartphones, it’s clear that iPhone users spend significantly more time browsing the Web, watching YouTube videos, checking stock prices, and so on. Over the holidays, the iPhone accounted for more traffic to Google servers than any other mobile device, despite the fact that it has a fraction of the worldwide market share held by smartphones based on the Symbian, Windows Mobile or BlackBerry operating systems. Why? It’s a better browser.

The software gets most of the credit. But the features that make the iPhone a superior smartphone–a sophisticated user interface; a large, high-resolution display; high-quality video playback–all require more powerful hardware too. Just as Windows Vista’s Aero interface needs a decent processor (and lots of memory), a better smartphone requires a powerful application processor. In fact, the mystery application processor in the iPhone is based on the same ARM 11 series core found in the new Samsung S3C6410, and is probably very similar, even though Apple uses different model numbers.

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Buzz about Intel getting back into the discrete graphics processor market is once again building. Digitimes reported today, based on sources it spoke to at this week’s Computex trade show, that Intel will return to the discrete graphics space in 2008. (Link: here.) Digitimes cites its sources saying Intel would get started by offering a mid-range GPU product priced at about $300.Discrete graphics or GPUs (graphics processor units) as Nvidia likes to call them, is an area that Intel has tried, and failed, to enter before. The chipmaker purchased Chips and Technologies, then a leader in graphics, in 1997, for example. It used Chips’ technology to launch the Intel i740 GPU. But, two years later, the i740 GPU was being outclassed by others’ and there was little interest in its follow-on. Intel thus cancelled the i740 chip along with its successors.

For what it’s worth, Intel’s 810 chipset—its first to incorporate a graphics processing core—which arrived in June 1999 lived a long life. Its legacy is today’s graphics-equipped Intel chipsets, such as the 965 Express. Despite its failed attempt to enter the discrete space, Intel never got out of PC graphics entirely. It’s a well-known fact that enough of its chipsets shipments incorporate graphics processing cores to make it the leading provider of PC graphics. Nvidia, meanwhile, is tops in GPUs, followed by ATI. Due to a massive amount of consolidation, only Nvidia, ATI, Silicon Integrated Systems, VIA Technologies–through its relationship with S3–and, of course, Intel are developing new PC graphics technologies at this point. Nvidia now stands alone as the only independent provider of both GPUs and chipsets for PCs, following Advanced Micro Devices acquisition of ATI Technologies. Others focus on chipsets.

Thus question everyone will ask is what, if anything, will Intel’s release of a GPU do to the market? Some reports (link: here) suggest Nvidia may be working with Intel in some manner. Could Nvidia be sharing graphics technology with Intel in an effort to gain a better position in the market? A partnership between the two chip companies doesn’t seem terribly far-fetched to me. Time will tell. Certainly file this one under “potential big deal.”