This week's Computex trade show in Taiwan has seen the opening shots in a new industry battlefield with the launch of Intel's Atom chip and Nvidia's Tegra system-on-a-chip.

Both are aiming at the emerging market for powerful truly portable computers. The Atom shows the PC industry scaling down and, though Nvidia is best known from PC graphics, the Tegra is just one example of a typical handheld design beginning to scale up, although Nvidia is a newcomer to this space.

The Atom is a slimmed-down chip using the classic x86 PC architecture. The Tegra wraps Nvidia graphics round a single Arm11 MP core, following a pattern common in the mobile phone and PDA industries.

Nvidia demonstrated Tegra at Computex, screening 720p high-definition video side by side with an Atom-powered Asus Eee PC running what it called standard definition, and drawing something like a 10th of the power – 1.3watts as opposed to 12watts – and using a motherboard a 10th of the size.

You can see a Youtube video of a version of this demo here, although it does not make clear how the power drain of the displays is factored in. Nvidia is said to have a build capable of full 1080p high definition.

Texas Instruments earlier this year demonstrated its OMAP 3430 system-on-a-chip, also using an Arm core capable of delivering 720p video. Apple's iPhone and iTouch, which also use Arm cores, show that handheld video can be popular and they also happily play to a TV screen where high definition will make a difference.

But these are information delivery devices. The emerging new mobiles are exciting because they can also be used for heavy duty input – and the fact that people are willing to struggle with today's completely inadequate handheld keypads shows how important this is.

The big question is whether products based on cores from Arm, or rivals such as Mips, can compete with x86 on the emerging generation of mobile working platforms.

The ramifications are endless. Intel, and by extension the US, dominates the x86 processor market; these rival systems-on-a-chip open the market to other companies and countries, such as Samsung in Korea.

The new low-cost ultra-mobiles are putting pressure on the price of Microsoft software, and they are less tolerant of bloatware. This opens up a huge opportunity for Linux, which is gaining impetus in emerging economies such as India and China.

Vendors of Linux machines can throw in a slim operating system and full Microsoft-compatible office suite virtually for free.

The Tegra supports only Windows CE and Windows Mobile. The Omap 3430 supports Linux, Windows Mobile and Symbian.

Arm has announced a new graphics processor design, the Mali-400 MP, that can be used with its cores, opening the market even further. Bob Morris, director of mobile computing at Arm, said in Taiwan the Tegra includes a beautiful graphics engine, but the Mali-400 gave Arm licensees who lack Nvidia's expertise the ability to have a high-performance graphics system.

He saw the emergence of platforms like the Tegra as a huge opportunity. He said: "As much as Intel is talking about pushing down into Arm's area, this is an chance for our partners to push up."