By Seth Weintraub and JP Mangalindan

As Intel’s power-hungry chips grow more efficient and ARM CPU designs make strides in performance, the two chipmakers find themselves facing off for market share in a familial safe ground that’s become a veritable hot zone brimming with untapped potential and consumer dollars.

We’re talking, of course, about the living room.

Until recently, Intel (INTC) and ARM have largely stayed out of each other’s way, with each one dominating a different part of the computing world. Intel’s rule over the personal computer industry is as storied as it is solid — variants of the chip titan’s CPUs can be found in an overwhelming majority of traditional PCs. Last quarter, it was estimated the company’s market share inched up to nearly 72%, while its closest competitor, AMD (AMD), saw its market share slide slightly to 28%. And Macintosh and Linux desktops are almost entirely Intel-based as well.

By and large, the smartphone industry has been dominated by ARM’s battery-sipping CPUs. A full 98% of the world’s smartphones are powered by them, including Apple’s iPhone 4, which has the same CPU as the iPad, formidable Android beasts like the HTC Incredible, and pretty much every new BlackBerry and Nokia you could shake a Bluetooth headset at.

But with the exception of some small Linux-powered “smartbooks,” ARM has yet to make a dent in general-purpose computing. That may change in the medium-to-long term as its chips become increasingly more capable. Qualcomm (QCOM) recently announced that devices using a 1.2 GHz dual-core version of the current single processor are already being built, and another chip running at speeds up to 1.5 GHz will be designed into devices later this year.

Meanwhile, Intel’s own Moorestown platform, positioned as a faster, more battery-friendly follow-up to its popular Atom chips, may help the company make significant inroads when it starts to appear in tablets and smartphones as early as the third quarter of 2010.

ARM’s governance of the mobile arena and Intel’s grip over the traditional PC means the overall landscape won’t be turned upside down, at least not in the next few years. But other areas of computing will benefit from the chipmakers’ rapid development as well.

Revolutionizing the living room chip-by-chip

Enter the TV.

Though the television has been a household mainstay for decades, its definition has become particularly fluid over the last few years thanks to Microsoft’s Intel-based media center PC, Apple’s Intel-based Apple TV, and even the Mac Mini acting as a media center in some homes.

More recently, ARM has elbowed its way into the living room with several new products from some non-traditional vendors. Here are a few more notable examples:

• Hard drive manufacturers have emerged with several low-cost ARM and Linux-based media centers, including Seagate’s FreeAgent Theater and Western Digital’s WD TV Live, that stream 1080p video. Their incentive is pretty simple: make quality, inexpensive media centers for people to purchase and fill with videos. In doing so, they’ll buy more hard drives. Both manufacturers went out and found low-cost ARM-based media center platforms and rebadged them with their own labels.
• Boxee, a cross-platform freeware home theater PC program, spent years adding functionality to other media centers and Intel-based computers, so it developed the know-how to strike out on its own. The result: The Boxee Box from D-Link, a media streamer that couples Nvidia’s Tegra 2 mobile processor with ARM’s most cutting-edge tech, the Cortex multi-core A9, which can handle 1080p playback and HD streaming.
• Roku’s digital video music player allows users to instantly stream Netflix (NFLX), Amazon video on demand, and Pandora radio to their TVs. And at $80, it’s almost an impulse purchase.
• Even TV sets now come with ARM processor-based media centers built into them. For example, Vizio units with the ‘Internet Apps’ feature also allow Netflix, Vudu, Amazon video-on-demand, and Pandora streaming, as well as access to Flickr accounts, should users be moved to manage and share photos and videos.

Google TV: bucking the trend

Given ARM’s adoption in these living room devices, Google’s announcement last month that it’s partnering with Intel for its Google TV initiative couldn’t have been more of a shocker. Though the prevailing winds in the media center arena may have been blowing ARM’s way, when push came to shove, Google opted for its competitor.

According to a source from Logitech (LOGI), one of two announced Google TV hardware vendors, ARM’s current chips still have several notable design limitations that could have been sticking points for Google (GOOG). Unlike current ARM chips, Intel’s chips can process multiple 1080p streams — a must-have feature since one of Google TV’s many innovations is the ability to broadcast several live streams of the channel’s current show. While ARM’s power-efficiency is of utmost importance for mobile device makers, it’s pretty much a moot point for living room devices that are plugged in.

As far as sheer computing power goes, Intel remains champ. Indeed, going with an Intel processor that can do everything right now, including breeze through Flash content and Android-friendly games, gives Google a leg up on Apple, even if the iPhone and iPad share the same GPU as Google TV.

It’s been speculated that the Cupertino company will use its own ARM-based A4 chips in the next version of AppleTV. While these chips are zippy enough for the iPad and iPhone, they just can’t match Intel’s latest Atoms chips feature for feature, particularly in high-end gaming. That means Apple (AAPL) will have to wait while the tech plays catch-up.

So does the Google-Intel partnership mean a reversal of fortune for ARM? Probably not, particularly if rumors of a cheaper ARM-equipped Apple TV have any truth to them. But as the battle for supremacy in the living room continues, the competition can only be a good thing in terms of driving development.

Best of all, you, the end user, will have a front-row seat.