Intel has focused its Atom microprocessor on new kinds of devices from netbooks to tablet computers. Advanced Micro Devices is now launching a new version of its Fusion chips — which combine a processor and graphics in the same chip — to go after the same market.

This means we’ll likely see smarter and smarter internet-connected gadgets in the future. Shane Rau, an analyst at IDC, expects this market segment to grow at a double-digit rate in the next five years.

The new AMD Embedded G-Series platform uses the first Accelerated Processor Unit (APU, or a combo chip), which AMD has designed for “embedded systems,” or the gadgets that aren’t considered phones or PCs. Embedded systems typically serve one or two functions and are generally not programmable for other tasks.

AMD has offered chips in the embedded market for some time, such as its AMD Geode processor from 2003. But it has steadily increased the computing power of the chips it has offered in the space, culminating with an APU that is optimized for low-power consumption, smaller size, lower prices, and high performance.

AMD is targeting the new chips at a variety of vertical markets. Those include thin-client computers for enterprises, kiosks and cash register systems, digital signs, industrial controls, rugged military systems, medical imaging, game machines, single-board computers, storage, and telecommunications/networking gear. With the G-Series, computer makers can design a PC with a 3.5-inch circuit board (pictured).

The AMD Fusion family of APUs combines a microprocessor with a graphics system all on one chip. The G-Series platform has two “Bobcat” microprocessor cores, a variety of video processors and a controller hub for display output and input-output functions. AMD has lined up a number of developer tools for support. And its customers include Microsoft’s new Surface table computers, MediaVue, Quixant, Wyse, Fujitsu, Advansus, Compulab, Congatec, Haier, Kontron, Mitec, Sintrones, Starnet, WebDT, and Hewlett-Packard.

AMD says its embedded G-Series platform uses chips that are smaller than Intel’s equivalent Atom chips. That means they use less power and cost less.