Intel has so far dominated the high-growth netbook category with its Atom microprocessor, but that position is unsustainable, according to one of its chip rivals, Nvidia.

Chips based on ARM of the UK’s designs are set to drive a new wave of netbooks, smartbooks, Mids (mobile internet devices) – call them what you will – going on sale over the next six months, and Intel is in no position to compete, it claims.

Michael Rayfield, general manager of Nvidia’s Mobile Business Unit, just showed me one of the new devices – a Mobinnova model from Foxconn (pictured), which is using his company’s Tegra chip. It is one of 27 such devices being built by different manufacturers, most of them Asian, over the next few months using Tegra (Microsoft has also announced the new Zune HD player will have a Tegra chip.)

Nvidia is best known for its graphics processors and Tegra excels in rendering high-definition video as well as Flash animation. The chip has a CPU, graphics, video and image processors and HDMI capabililities all on board.

“It is by far the most advanced, ultra-low-power, high-definition computer on the planet,” said Mr Rayfield.

And how does it stack up against Atom?:

“Atom is a non-starter [in a low-priced netbook], it’s got a couple of hours of battery life….standby power with Tegra is tens of microwatts, Atom’s standby power is four or five watts. I look at it as a dehydrated notebook computer [chip]. I think the days of Atom and their chipset in netbooks are winding down, because it just hasn’t been a good experience,” he said.

Intel might strongly disagree. Atom has been a huge improvement over its Celeron processor in early netbooks and it promises much lower power versions in the future. The two companies also have a somewhat antagonistic relationship.

Mr Rayfield does see a future for Atom in high-end netbooks, the ones that can cost up to $600, and Nvidia sells in that market with its complementing Ion graphics processor.

Tegra will offer between 10 and 20 hours of battery life at netbook price points of $100 to $200 (or less if subsidised by mobile carriers). Mr Rayfield thinks its graphics capabilities will also help it to outshine other ARM-based chips coming from Qualcomm and Freescale later this year.

Analysts were enthusiastic about Tegra after Nvidia’s analyst day last month. Those at Thomas Weisel Partners described it as “the most compelling ARM-based netbook/smartbook processor currently in the market…We are raising our Tegra revenue estimates by more than $150m for [fiscal year 2011], to more than $200m (up 175 per cent year-on-year).”

Nvidia itself is even more confident. Jen-Hsun Huang, its co-founder and chief executive, says he think Tegra will rise from zero revenues right now to account for 50 per cent of the company’s sales in the foreseeable future, as it moves into phones and media players.

That’s quite a turnaround if a business built on power-hungry PC graphics cards can be driven in future by a chip as small as a dime.

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