Intel chief executive Paul Otellini said today that Intel’s newest  chip will generate $125 billion in revenue this year for PC makers. The chip, codenamed Sandy Bridge, combines graphics and general computing functions; it will account for an estimated one third of Intel’s total sales this year and has been designed into more than 500 computer models.

Otellini made the announcement at the company’s press conference at the Consumer Electronics Show in Las Vegas. The statement shows just how big an impact the Sandy Bridge technology will have on the computing industry.

The chip is popular because it packs strong performance with the ability to reduce costs in a computer by getting rid of stand-alone graphics chips — at least in the low-end part of the PC market.Otellini said that Sandy Bridge was the best and most exciting product he had worked on in more than three decades at Intel.

Intel has been beating the drum on Sandy Bridge — formally known as the second generation Core microprocessors with the model numbers i3, i5 and i7 — since last year. The combo chip competes with Advanced Micro Devices’ Fusion combo chips. With it, Intel hopes to steal a chunk of the graphics chip business away from AMD and Nvidia. Sandy Bridge-based PCs will debut as early as Jan. 9.

Mooly Eden, an Intel executive, said that Sandy Bridge is the cornerstone of Intel’s future. It has either two or four microprocessor cores, or computing brains, on a single chip. But the graphics side of the chip isn’t that powerful, rivals say. Eden said that is not true, saying that “our processor graphics is outperforming 40 percent to 50 percent of the discrete (stand-alone) graphics chips in the market today.” He showed a demo of World of WarCraft Cataclysm, which was released in December, running flawlessly on a Sandy Bridge machine.

Gabe Newell, chief executive of game developer Valve, said Sandy Bridge is a “game changer” for games on the PC. He said that his company is creating its Portal 2 game to run on the PC, and it will be able to run on Sandy Bridge machines when it comes out in April. Newell showed a clip of Portal 2 running on a Sandy Bridge machine. Jeff Bellinghausen, chief technology officer of Sixense, showed Portal 2 running with a gesture-based control system coming from Razer.

Sandy Bridge has 1.6 billion transistors, or basic chip components, on a chip. That chip is made with Intel’s most advanced 32-nanometer manufacturing process. Holding up a wafer full of Intel chips, Eden said, “Over here, I’ve got more transistors than most of you have neurons in your brain.”

On Excel spreadsheet calculations, Eden said the fastest four-core Sandy Bridge processor is 69 percent faster than Intel’s fastest previous processor. The dual-core version is 831 percent faster at those calculations.

Sandy Bridge’s features include Intel Quick Sync Video, which can quickly convert video from one format to another. Eden claimed that under some conditions, Sandy Bridge can transcode video faster than stand-alone graphics chips.

It has improved video performance, stereoscopic 3D, and Intel Insider. The latter is a security system that allows users to download high-quality movies to the PC and play them without violating Hollywood copyright rules. Intel Insider will make the PC a more trusted platform for Hollywood studios.

Kevin Tsujihara, president of Warner Bros. Home Entertainment Group, joined Eden on stage and said that the film company never felt comfortable with the anti-piracy features of the PC. But Warner Bros. will now put its content available on the Sandy Bridge platform earlier in digital download form because of its built-in digital rights management and security features.

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