Silicon Valley’s love affair with the band U2 is about to expand into a ménage a trios, with Intel jumping into bed with the Irish rock band as sponsor of its world tour--reports our very own Silicon Valley Watcher, Jochen Siegle, also a contributing writer to the top German weekly news magazine, Der Spiegel, and Spiegel Online.

According to sources close to the deal, the value of the sponsorship deal is about $20m and Intel outbid DHL, the international package delivery company for the top sponsorship slot. It is part of Intel’s efforts to extend its “Intel Inside” brand into consumer electronics markets.

The deal expands on Silicon Valley's involvement with U2, and it signifies the growing importance of consumer electronics to the region’s technology companies and venture capital investments. Apple Computer is expected later this week to introduce a black iPod, pre-loaded with U2’s forthcoming CD release “ How to Dismantle an Atomic Bomb.” The songs will be available on Apple’s iTunes service about 1 month before they are released on CD.

U2’s lead singer, Bono, is working with Elevation Partners, a venture capital firm that includes Roger McNamee from Silver Lake Partners, Fred Anderson, the former Apple Chief Financial Officer, and John Riccitiello, former president of Electronic Arts.

The “Intel Inside” campaign has been extremely successful within the PC market. But now Intel’s focus is shifting to consumer electronics, where the Intel brand has less heft.

Intel has been trying to raise its profile in consumer electronics, where its XScale based-chips--based on designs by ARM, the UK chip company--and flash memory chips are used in some cell phones and other digital devices. It has also been heavily promoting the concept of the “digital home” where video, music and internet services can be freely shared within the home.

However, Intel’s cancellation of its large-screen TV chip last week, and prior short-lived forays into consumer electronics markets with its own branded digital music players and other products--are some of the challenges it will face expanding its brand into consumer electronics markets.

U2 could be a valuable ally in Intel’s brand building. U2’s audience includes plenty of people who grew up with U2 more than 20 years ago and now constitute a valuable demographic with plenty of money to buy expensive digital entertainment systems.

The sponsorship deal also indirectly associates Intel with Apple’s iPod music player--an association that sources close to the deal say was a key factor for Intel.

Hewlett-Packard is another large Silicon Valley company that has been keen to exploit the Apple iPod brand. Earlier this year it struck a deal with Apple to offer a HP branded iPod.