That didn’t make sense to me.  Samsung was developing its own high power chips that are almost as fast as the standard Intel Atom processors that are inside GoogleTVs, except they are based on the ARM architecture and are extremely low power and cheap to make.  GoogleTV is based on Android and Samsung’s ARM chips have had a great deal of success in Android devices.  In fact, Samsung builds Apple’s (AAPL) ARM-based A4 chip which has seen considerable success in mobile devices, but also AppleTV.  Here were my observations at the time:

• Recent reports have Orions powering Samsung phones due at the beginning of next year.
• GoogleTV runs on Android 2.1 and Android runs really well on Samsung’s processors (seen the Galaxy S sales figures?).  Samsung’s new Dual Core Orion chips, expected in phones in H1 2011 would be a perfect fit.  ARM processors are cheaper (especially for Samsung), run cooler (no fans needed) and use much less electricity.  Those are also differentiators that consumers can appreciate.
• Apple’s AppleTV runs on a Samsung-built ARM Cortex A8 processor that also live inside the iPad and iPhone.  Smartphone processors perform very well in smart HDTVs.
• Orion Processors can deliver multiple 1080P video streams and what better way to showcase its new processors than have them in a high end HDTV?

Samsung does use Intel chips for some of its Windows laptops. But overall, its own chips are way more suited to running a set top box than Intel’s.

Today, Bloomberg did a follow up story saying that it believed that Samsung was in fact going to use its own chips for th GoogleTV.

Here’s why that is important: In the last few years, players like Roku, AppleTV and even some hard drive manufacturers like Seagate and Western Digital have turned out extremely low cost ARM-based set top boxes.  Roku’s line starts at around $60 and can do almost everything a GoogleTV can do – or at least what many people use them for: Netflix, YouTube, Amazon Video, etc.  GoogleTVs, on the other hand, use an Intel Atom processor and chipset which can push Flash videos out at 1080P.  But for that trick, GoogleTVs start out costing $300 and are about 3 times the size of a Roku or AppleTV.  Intel Chips require much more energy and therefore cooling which makes the product much more expensive.

The cheapest Intel set top box, the Boxee Box (which originally planned to use NVIDIA Dual-Core ARM processors, but had to switch to Intel for some reason) usually come in at $200.  That still three times the cost of a base model Roku.

Even where Intel currently has an advantage, in 1080P Flash video, ARM is quickly catching up.  Adobe (ADBE) and ARM are feverishly working on getting Flash to work well on XOOM and other Honeycomb Tablets, which have 720P resolution.  Most set top box owners would be happy with that.

Intel isn’t asleep at the wheel, however.  They are also working hard to bring the costs of their low power processors down including improving their integrated video.

However, it might not be enough.  With ARM processors able to do just about everything a HDTV owner could want, and coming in way below Intel on price and energy use, there may no longer be room for Intel.  The economics just don’t work out.

Bloomberg says the only thing holding Samsung back is an Intel exclusivity agreement but “Google lifted the restriction.”.  Intel was a GoogleTV launch partner.

The transition from Intel to ARM in GoogleTVs won’t just be at Samsung.  Sony (SNE) and Vizio, two other GoogleTV partners, are both making Android devices based on ARM processors, so converting to ARM will be relatively easy.  Logitech(LOGI) likely won’t be too far behind if it wants its Revue set top boxes to remain competitive in the sub $100 set top box landscape.