Advanced Micro Devices is developing a low-power processor for mobile devices and sub-notebooks, the company confirmed Friday, quashing months of speculation that it had abandoned the project.

The chip will compete with Intel's Atom processor and potentially supplant AMD's low-power Geode x86 system-on-chip, which is included in One Laptop Per Child's XO laptop. Based on the x86 system-on-chip design acquired from National Semiconductor in 2003, Geode is also offered in thin clients and embedded equipment.

AMD declined to comment on release dates for the chip.

Plans to develop a low-power chip, code-named Bobcat, were first revealed by AMD last year. At the time, AMD officials described the chip as "designed for maximum energy efficiency and performance-per-watt for next-generation mobile devices, scaling as low as 1 watt."

The company has been quiet about plans for Bobcat ever since, leading to speculation among industry observers that it had abandoned the project as it tries to recover from consecutive quarterly losses and restructuring.

Further details about the new mobile chip are expected to be revealed in November at the company's analyst conference, said AMD's new CEO Dirk Meyer, during a conference call on Thursday to discuss the company's financial results.

"Clearly, when you talk about smaller form-factor notebooks and inexpensive notebooks that is a market segment we are interested in," Meyer said.

AMD could be a late entrant to the market of low-power chips for mobile devices rife with competition. Intel released Atom processors earlier this year, building the x86 architecture into low-power chips that are now being used in low-cost sub-notebooks and mobile Internet devices. Via also introduced the Isaiah processor for mobile devices and sub-notebooks. In June, Nvidia announced the Tegra system-on-chip for cell phones with an integrated graphics processor.

Apple is also taking a stab at the mobile chip market, using the recent acquisition of PA Semi to develop system-on-chips for the iPhone.

Intel is already working an Atom successor code-named Moorestown, due for release in 2009. The platform includes a system-on-chip code-named Lincroft, which is based on a 45-nanometer Silverthorne core, and puts a graphics, video and memory controller on a single chip.