Looks like ARM just won the smart TV war

Intel (s INTC) is shuttering its Digital Home Group, which means the next generation of Google (s GOOG) TV and Boxee devices will be powered by ARM-based chip sets. The folks who have been working on Intel’s CE products are absorbed by the company’s tablet group, AnandTech reported Monday night. Intel has since confirmed the move. “This was a tough decision; Intel led the creation and launch of the smart TV category and its first products,” I was told by a spokesperson.

Intel’s Digital Home Group was behind the CE4100 Atom processor, which powers D-Link’s Boxee Box, Logitech’s (s LOGI) Revue and Sony’s (s sne) Google TV products. The company will now exit the connected device space and instead concentrate its TV efforts on chips for the next generation of pay TV set-top boxes and residential gateways, which is industry-speak for cable modems.

I asked Google and Boxee how they felt about the move, but both companies shrugged it off as a minor hiccup. “Boxee’s always been hardware agnostic. We built Boxee to run on multiple chipsets,” Boxee VP of Marketing Andrew Kippen said via email, adding: “Our first Alpha was actually built on an ARM based chipset.” He also pointed out that Intel will continue to sell and support the CE4100, which means that the current-generation Boxee Box won’t be disappearing any time soon.

Google didn’t seem too worried either. “Intel has been a great partner for us throughout the launch of Google TV. We continue to work with many chipset partners, including Intel, to bring new Smart TV products to the market,” a spokesperson told me via email . If I had to guess, I’d say those future products are more about the intersection of TVs and tablets than traditional Google TV boxes.

It’s been clear for a while that the next generation of Google TV devices will be powered by ARM-based chipsets, which should also bring the price of these devices down significantly. Sources familiar with the matter told me today that Google has in fact multiple deals for these kinds of devices sealed.

All of this makes me wonder whether Intel’s decision to pull out of this market may actually have been a reaction to a move away from it’s platform, or whether it was based on the sales numbers of current-generation smart TV devices – which haven’t been great, to put it kindly. Either way, the big winner at the end of the day seems to be ARM.