One feature that stood out was the camera's "burst mode," which captures 10 full-size eight-megapixel images at a rate of 15 per second. Smith says that feature rests on a combination of image-processing circuits built into the Medfield chip and dedicated software tweaks on top, technology that comes in part from Intel's acquisition of the Dutch image-processing company Silicon Hive earlier this year. This kind of hardware could help apps developed for augmented reality.

Intel's reference tablet, which used the same Medfield chip as the phone, was running the latest version of Android, Ice Cream Sandwich. It had a slightly larger screen than the iPad 2 but was about the same in thickness and weight. A limited trial suggested that it was noticeably nicer to use than older tablets based on the abandoned Honeycomb version of Android.

Intel has tried to gain traction in mobile devices before, but those efforts were unsuccessful. In the immediate aftermath of the iPhone's meteoric rise, the company focused on netbooks and mobile Internet device—computers larger than smart phones that never became popular. A long-term effort to develop an open-source mobile operating system to rival Android, called Meego, was scrapped earlier this year when partner Nokia signed a deal with Microsoft to use Windows instead.

It seems Intel has been hampered by both technical and business-strategy problems that come with trying to change the course of such a large company. It took time for engineers to find a way to compress their usual three-chip design into a single system-on–a-chip, says Smith, and to help Google make Android work on Intel chips. Now Intel finally has a chip that can match and even surpass established mobile chips. "Now we have this in place, we can accelerate," Smith says. "We haven't been able to show a production-grade design before."

Intel has tested its reference handset against a handful of the leading phones on sale today. It says these tests show that Medfield offers faster browsing and graphics performance and lower power consumption than the top three, says Smith.

Linley Gwennap, an analyst with the Linley Group, says it's very significant that Intel is finally offering a fully integrated system-on-a-chip. "It should make Intel more competitive—they're kind of at the same level as anyone now," he says. Gwennap adds that Medfield chips use more advanced technology than the established competition, which means the chip's features are much smaller. That helps improve power consumption and processing power. "Medfield is based on 32-nanometer technology, while the biggest fabs making ARM-based processors are today shipping either 40 or 45 nanometers," he says.

That lead is likely to disappear as ARM-based processors catch up in the next year, but Smith says that Intel will start making mobile processors using 22-nanometer technology in 2013. Manufacturers of ARM-based chips say they plan to make that jump in 2014. Gwennap says this next generation will give Intel its best hope of grabbing a significant chunk of a new market: "I expect they'll get into a few phones with Medfield, and then it will be the 22-nanometer chip that really makes a difference."

However, Gwennap notes that Intel could lag behind in other ways. Although it has caught up by integrating everything a processor needs into a single chip, established mobile chip makers like Qualcomm are already going a step further by incorporating the usually separate wireless modem chip, resulting in even further efficiency gains. Smith says Intel isn't ready to talk about when it might also make that step.