Strategic blunder of the century so far?
> There was just one problem: The PC era was about to end. Apple was already working on the iPhone, which would usher in the modern smartphone era. Intel turned down an opportunity to provide the processor for the iPhone, believing that Apple was unlikely to sell enough of them to justify the development costs.
https://www.vox.com/2016/4/20/11463818/intel-iphone-mobile-r...
You say that as if Intel should have known that the iPhone would be an explosive hit. They probably assumed it would be yet another Blackberry competitor, not really a threat to their desktop hegemony.
Even if the iPhone wasn't an explosive hit and the smartphone growth didn't explode, 10% of Blackberries market would have meant millions of processors sold to Apple in the first years and any other Blackberry competitor that was interested,
Some people thought that, yeah. But not everybody, and not on the same places Intel sold their chips to.
Anyway, Intel sold their foundry exactly because its unitary profit was way too small for them. Since then, the company only got more expensive, so they wouldn't be able to keep it.
But they clearly had high ambitions for their new revolutionary ergonomic mobile "phone" + "music player" + "internet". They wanted to define a new indispensable market and they wanted to own it. They already had a multi-year product path and design pipeline for regular major upgrades in place.
The iPhone was intended to be a "next big thing" from the start.
And it seems unlikely Steve was selling Intel on doing a new chip for 1% of the phone market. He was telling Intel this was the future, in some form.
Apple was an objective market demonstration, with no ambiguity, that there was now a need for low-power first (as apposed to speed first) that would got to other suppliers if Intel didn't move.
This was a leadership failure at Intel. They happen.
The big telcos were handing out data in miserly amounts and eye bleeding prices (think 50 bucks for 1MB then another 30-50 for SMS). AT&T was willing to pair with an unlimited plan set the iPhone wildly ahead of all the other phones in that category. VZ messed up big on that one. They were touting how amazing their network was meanwhile their competition was letting people surf the net from their phone. VZ was meanwhile still charging silly rates for SMS. Meanwhile I could open a connection on an iPhone and use an online chat service or the unlimited SMS. All of the other phones from that time could do similar things. It was the per month charge that people balked at to do simple internet things. Then on top of that it was apple so it had a bit of cool to go with it. I personally think though without that data plan the thing would have been a dud.
From what I recall, the original iPhone only supported 2G, while contemporary phones supported 3G. I remember a lot of criticism around the iPhone web experience because of that, even though the interface was clearly superior to everyone who used it.
It looks like there were relatively competitive data plans available[1] that offered unlimited data. I'm not really convinced that that was the problem.
---
1. https://arstechnica.com/gadgets/2007/04/data-plans-the-barri...
Yep. Only EDGE and quad-band GSM ("2G"). The second generation iPhone was called the "iPhone 3G" specifically because it supported tri-band UMTS ("3G") with HSDPA. In fact, some even back-named the first generation iPhone to "iPhone 2G".
I honestly think people overlook this aspect of Jobs leadership, basically from the time he returned on Apple he doubled down on mobile computing repeatedly throwing 50% of Apple's marketing budget into the unproven iPod for instance. Why was Jobs able to see the writing on the wall and not Intel? I think Steve Jobs himself said it best:
https://www.youtube.com/watch?v=P4VBqTViEx4
Intel itself was NOT totally blindsided by the mobile revolution. Intel Atom development started in 2004. Intel Atom could have dominated the market. There were Intel Execs pushing Atom. But all the R&D was pumped into the desktop and server business, the quality silicon was reserved for the desktop and server business, Intels execs didn't want these inexpensive chips for what were presumed to be peoples secondary computers to cannibalise its expensive desktop and server chips, and the strategic vision was simply bad. You can apologise for it but the mistake may have doomed the entire business and plenty of companies did not make the same mistake.
Intel wouldn't even exist if they didn't already make such a shift away from the memory market into the microprocessor market firing most of the their company in the process. Intel had leaders with strategic vision and guts back in the day, and the senior leadership simply weren't good enough to commit to mobile when that bridge had to be crossed.
Depends on what you call Atom, but if you mean Atom as it was released then absolutely no, it had exactly zero fighting chance. IIRC first Atoms were Pentium 4 or so fabricated on smaller process and resulting in lower power draw. The only meaningful use for early Atoms was crappy netbooks.
However, it was or could have been an important stepping stone for paving the road towards x86-based low power devices. Remember, it was also a time where linux-on-arm started booming. It could have been an alternative to ARM SoCs, but there were simply too little attractive offerings and Broadcom/Freescale/Ti effectively ate the market
Everyone has rose tinted glasses and short memories when it comes to just how far computers have come in the last 15 years. For reference, netbooks predate iPads by 3 years. They came out about the same time as the first iPhone.
The low power long life computing platform has for the longest time been a dream. Netbooks with 4-8 hour battery existed at the same time that a top of the line laptop would get only 3 hours battery life, a normal consumer grade laptop would top out at 1-2 hours, for a 1/4 of the price.
If you squint hard enough, there is no discernible difference between the aspiration of the netbook platform, and a modern chrome book or iPad with a keyboard, but Intel doesn’t make processors for either platform.
Completely agree here, I call Atom important stepping stone. However, as you mentioned Intel does not make processors for descendant platforms.
As I have elaborated in different comment, I guess the major reason Atom failed was market positioning. They were effectively eaten by ARMs getting more powerful from one end and mobile CPUs getting more power efficient from the other end.
So while I agree that Atom based netbooks helped start the whole mobile compute market, my argument is that market positioning of Atom products meant that they were destined to be replaced. IMO success of Atom required a bit more useful PC-like devices AND high integrity SoCs for appliances.
People also overlook the mobile phone market outside US.
Sucsess(as measured in valuation back than, not today, that's how managers measure themselves), was far from certain.
It’s still a lesson on the importance of keeping a foothold for the lowest volume market even if you’re not making any money as long as the cost is sustainable - cutting every unprofitable part of the business leaves you for disruption. Same thing happened to Microsoft with smartphones and Google with social.
Intel had a cellular modem business which they formed in 2011 and sold to Apple in 2019.
They acquired* from Infineon. And completely messed it up.
Magic is finding out what of those can fly and it is not a manager but a leader quality to do well with new fields. Although sometimes managers feel the obvious moves for the short term sometimes better.
Sure, it can be hard to know when to stay in, but the “death by a thousand cuts” is not a financial problem. These are often rounding errors to continue. It’s a question of focus. And Intel clearly made the mistake of thinking they didn’t need to focus on mobile.
Qualcomm still has a 60-70%+ market share in the $300+ Android phone market and their gross profit margin was similar to Intel until last year so it's obviously doable. And XScale/Intel was probably the best positioned company to dominate the ARM SoC market back in the mid 2000s.
From Paul Otellini exit interview in 2013
>"We ended up not winning it or passing on it, depending on how you want to view it. And the world would have been a lot different if we'd done it… The thing you have to remember is that this was before the iPhone was introduced and no one knew what the iPhone would do... At the end of the day, there was a chip that they were interested in that they wanted to pay a certain price for and not a nickel more and that price was below our forecasted cost. I couldn't see it. It wasn't one of these things you can make up on volume. And in hindsight, the forecasted cost was wrong and the volume was 100x what anyone thought.”
The title of the article is "Paul Otellini's Intel: Can the Company That Built the Future Survive It?” and that is still a good question a decade later.
EDIT: corrected factual error. Paul was never a CFO but much of his career was in sales and marketing. Sales do count as "bean-counters" because their main metric are counting PaL.
Edit: I see you've changed your comment without acknowledgment. Still wrong 'sales and marketing' isn't 'bean counting' and Otellini had extensive 'tech' experience.
Similar to why the best sales leaders only do deals where there’s renewal possibilities in 2-3 years out.
https://dictionary.cambridge.org/dictionary/english/bean-cou...
https://www.zdnet.com/article/arm-shares-tumble-as-transmeta...
in 1997 Intel was terrified of Transmeta, and it lit a fire under their ass to get the Celeron out more quickly...
Me and a colleague worked a F-ton to test out not only the Celeron, AGP, SIMD, OpenGL, Unreal Engine, and all the latest games...
But Intel paid the game devs a Million Marketing bucks if they would optimize their games (and general software) to the SIMD instructions, to make the game feel more subjectively responsive on the Celeron as opposed to the AMD, and the seemingly incoming Transmeta.
so I think that Transmeta was the big blunder, but in reverse ; ; Intel should have been all over gaming, and not been afraid of some plucky startup...
But recall all the senior engineers at intel from <1995 had slide rules and pocket protectors.... they didnt see the entertainment wave of computing early enough and made far too many mistakes and tried to catch up.... personally, I think Linux saved Intel from bankruptcy.
Apple didn't move off Samsung entirely until the A8, and they still rely on many Samsung hardware IPs within the SoC to this day. It was not just a fab arrangement from day 1. https://twitter.com/calebccff/status/1472517091970494465
Apple relied on many of the same suppliers as the rest of the industry for a very long time, except the ones they acquired and closed-off. Purely on a "rising tide lifts all boats basis", Intel would still have had access to the dominant player if the ARM-based touchscreen era wiped out the incumbents. However, this is still a very low-margin business, despite requiring more engineering effort than desktop.
You could argue that $1500 phones were unthinkable at the time, but as a commodity, chipset manufacturers see less than 5-10% percent of that, even on flagship phones.
There was a deep dive article I came across about this a while ago and the only other interesting bits I've never seen anywhere else were tha
- Intel was offering a chip based on core/atom and couldn't hit the required performance/TDP
- apple wanted a custom chip meeting the required specs, but this is where Intel balked due to estimates of low demand to design and fab it
- apple went with ARM and PowerVR GPU was an important part of this story
Sometimes I wish I had a searchable full text index of articles I found interesting but didn't see value in bookmarking
I hope you won't mind this reply that isn't related to the topic, but this part of your comment stood out to me.
The way I get around this is by just saving the bits of articles I find interesting for later full-text search, and on the side I make topic-specific feeds of what I'm saving available via RSS for others to subscribe to.[1]
This paradigm shift from saving/bookmarking entire articles to saving highlights has worked really well for me, maybe it could work for you?
[1]: https://notado.app/feeds/jado - I run the service my highlights and feeds are hosted on, but if you're not interested in a subscription service that does this I don't think it's particularly difficult to spin up something yourself over a weekend or two
It wasn't that great then and it deserves death now. Zero ability to upgrade or get third party OS on it due to those processors not taking off.
Almost bought my niece an Android tablet with an x86 CPU. They were priced super low. Turns out there was a reason for that. Apps ran like shit and any games written using the Android NDK just straight-up didn't work.
The problem was that embedded OS-es like Symbian, A200, PalmOS were running circles around Windows Mobile. Most of them used Samsung SoCs which were few times slower than StrongARM.
StrongARM was seen exclusively in the context of it being used to "lift" extremely bloated WinMo smartphones, and was otherwise thought as an overkill for other uses.