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For Intel, the world's largest semiconductor manufacturer, 2003 can be summed up in one word: mobile. In March, the chip heavyweight, which holds an 82% market share in microprocessors for desktop PCs, introduced the Pentium M -- a chip that provides notebook PCs with better performance and longer battery life. It subsequently introduced Centrino -- a package that combines the Pentium M with several other chips, including one that connects laptops, via devices called "access points," to high-speed, wireless fidelity (Wi-Fi) networks that are typically then connected to the Internet. On the shoulders of a $300 million marketing campaign, Centrino sales took off.

And how. The Pentium M plus the Centrino combo accounted for about 25% of Intel's (INTC) total revenue in 2003, estimates Richard Whittington, an analyst with American Technology Research in Greenwich, Conn. In the third quarter, the dynamic duo spurred Intel's strongest year-over-year revenue growth since 1996: Sales rose a sizzling 20% in the period, to $7.8 billion, while profits jumped 142% vs. a year ago, to $1.7 billion.

The new chips have contributed disproportionately to profits, since Centrino's average selling price -- about $250 -- is around 40% higher than that for an average Intel microprocessor, Whittington estimates. The result is that the chip king's stock is up more than 80% this year, to around $32 as of Dec. 29.

MIGHTY MITES. Ready or not, Intel is rapidly becoming more tightly tethered to the wireless world -- and vice versa. Research consultancy Gartner Group predicts that big businesses increasingly will choose Centrino-enabled laptops as they replace their dead and dying desktop PCs over the next few years. Corporations want wireless because it makes employees more productive, letting them wander around the office with computer in hand.

And though much of the recent buzz on Intel has focused on its plans for digital-TV chips and a new desktop microprocessor, those won't benefit it nearly as much in 2004 as the next-generation Centrino and Pentium M chips scheduled for the first quarter. For the full year, Whittington estimates, those two products could account for 35% of total revenues and for a larger share of profits.

In part, that's because the new Pentium M, code-named Dothan, will be smaller than its predecessor -- and half as costly to make, according to analysts at Morgan Stanley. That helps explain why analysts polled by financial service First Call expect Intel's earnings per share to climb 61% in 2004, to around $1.24, as revenues rise 15.3%, to $35 billion. These analysts expect Intel's stock to hit $37 or so in 2004, up more than 20%.

ALL ACCESS PASS. The next Wi-Fi move will be to try to replicate Centrino's success on more than 120 million desktops that consumers buy each year. Sometime before mid-2004, Intel will unveil a new desktop chipset named Grantsdale -- its first total overhaul of that component in a decade.

In addition to doing the traditional task of coordinating the activities of key chips in a PC, Grantsdale will have wireless features that will significantly broaden the capabilities of desktops. Essentially, it will turn them into the type of access points that Centrino-enabled laptops must have to make a Wi-Fi connection.

For a couple of years now, Wi-Fi aficionados have connected their laptops to the Net via access points -- as long as those are within 300 feet of the laptop. Intel's theory is that it can now persuade millions of homeowners to install their own access points -- a desktop PC costing perhaps $1,000 that can connect every machine in a multi-laptop family to the Net.

PACKAGE DEAL. Better yet, says William Leszinske Jr., director of chipset and software marketing at Intel, access-point desktops that are equipped with a special circuit card will use radio signals to beam images to the family TV or music to the stereo.

That may sound farfetched. But more than half of laptops sold in 2003 came with Wi-Fi capability installed. And according to industry analysts, many customers buy laptops with Centrino inside mainly because of its Wi-Fi chip. That's fine with Intel, which makes most of its money on the Pentium M processor, by far the most expensive element in the package.

Most likely, Intel will pursue a similar strategy with Grantsdale. For instance, it could sell the chipset as part of a package deal with its new desktop processor. Called Prescott, it's a smaller-size (read: higher margin) Pentium IV that began shipping in small volumes in the fourth quarter. Intel declines to comment on its marketing plans.

CLOSING THE GAP. These initiatives could turn Intel into the king of Wi-Fi chips, now a $1 billion market. Nearly 8% of laptops shipped in October contained Centrino vs. 3.5% in May, according to NPD Group. That's an indication that Intel has begun to catch up with competitors such as Conexant (CNXT), Broadcom (BRCM), and Agere (AGRa, AGRb), which sell Wi-Fi chips separately instead of packaging them into combos such as Centrino.

Intel's new Centrino, whose Wi-Fi chip will match its rivals' capabilities by connecting to a wider variety of Wi-Fi networks, will further close the gap, says Dean McCarron, founder of processor consultancy Mercury Research. So will Intel's huge Centrino ad campaign, one goal of which is to establish the chipmaker's Wi-Fi credentials in the minds of consumers. Craig Mathias, founder of wireless consultancy FarPoint Group, believes that within 12 to 18 months, Intel will dominate the Wi-Fi chip market.

In both microprocessors and Wi-Fi chips, Intel still has hurdles to overcome. Next year, rival AMD (AMD) will roll out notebook processors based on its Althon64 architecture that could outperform Intel's, thanks to AMD's 64-bit processing capability, vs. Intel's 32. AMD lacks Intel's marketing muscle. But it's getting accolades from tech analysts, which will likely force Intel to cut prices on the new Centrino. Some analysts also question whether millions of consumers really will buy desktops to set up Wi-Fi access points at home.

"REVOLUTIONARY" CHANGE. Still, Grantsdale will likely succeed, if only because it includes features that allow for better graphics. And as it makes its way into PCs, consumers may ultimately find it cheaper to simply add a radio card -- which a desktop will need to function as an access point -- rather than buying a specialized access device from the likes of Netgear (NTGR) or Cisco (CSCO).

"[Grantsdale's wireless features] are revolutionary, and it will change a lot of business practices [of Intel's rivals]," says Steve Baker, an analyst with market consultancy NPD Techworld in Port Washington, N.Y. Clearly, the move to mobile is well under way. And it will help Intel continue to ride a wave of prosperity.