Intel today reached a milestone in its effort to create smaller and power-efficient chip packages, saying it had started sampling Nehalem-based chips code-named 'Jasper Forest'.

Jasper Forest is the first time Intel has integrated the I/O hub directly inside a processor, eliminating the need for a separate I/O controller, said Steve Smith, vice president digital enterprise group operations at Intel.

See also: Intel Nehalem Xeon review

The integration helps reduce the power drawn by a system while saving space on a motherboard, Smith said. In one test, Intel took a quad-core Xeon chip based on the Nehalem microarchitecture into which it integrated the I/O hub and netted 27 watts of power savings.

"We have removed a fairly large-footprint chip and saved power by integrated [the I/O hub] on to a single chip," Smith said. The chips will provide similar performance to existing Nehalem-based Intel Xeon processors, but be more power efficient, Smith said.

This is one more step in the company's efforts to integrate more features into the CPU, Smith said. Intel has already integrated the graphics processor with a CPU in a single package, and it hopes to pull in more components.

See also: FAQ: Intel's new Core i5 and Core i7 chips

The I/O hub is an interface that connects different components on a motherboard. The I/O hub found in the Xeon chip supports PCI Express, which is commonly used in PCs.

The Jasper Forest chips will come in single-core, dual-core and quad-core variants designed for the embedded, communications and storage equipment markets. The chips could appear in systems starting in early 2010.

Smith declined to name customers to which Intel has sent the chips for sampling.