Long term, the startup hopes to use microSD cards to bring a variety of other undisclosed functions to handsets similar to the way PCMCIA cards enhance PCs.

"It's really much more than that," said van Kempen, who helped develop some of the underlying technology enabling DVD disks. "Were basically adding a personal computer in an SD socket," he said.

Isaak van Kempen Chief executive, FXI Technologies

The potential market is huge. More than 500 million phones could have SD slots by June 2010, according to Tom Hackenberg, a senior analyst at market watcher IMS Research. More than 240 million of the 1.2 billion handsets shipping this year have SD slots, said Will Strauss, principal of Forward Concepts (Tempe, Ariz.).

If successful, the startup could open up a new way to bring third party hardware and software features to cellphones without requiring cooperation of handset makers or carriers. It could also fuel sales of flash cards which today are used in handsets almost exclusively for additional storage.

FXI began as Falanx Microsystems, a Norwegian startup that developed a mobile graphics accelerator. ARM Ltd. acquired Falanx in 2006, and made its graphics design the basis for its Mali 55 graphics accelerator.

ARM spun off the portion of the company that was already pursuing the notion of distributing games on SD cards. The resulting company was renamed FXI and given rights to the graphics core and related patents.

"We had already developed the architecture and had a major engagement with content folks in California," said van Kempen.