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Paul Otellini, the outgoing chief executive officer of Intel Corp., has managed to increase the chipmaker’s efficiency and boost its revenue by several times during his tenure at helm of the company. He also managed to put Intel’s chips inside Apple Macintosh computers in 2005 and return Intel the microprocessor performance leadership. But there is one flaw that Mr. Otellini regrets most about: failure to offer a competitive low-power chip for Apple iPhone.

“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,” said Paul Otellini, the now former chief executive of Intel, in an interview with The Atlantic web-site.

Since Apple decided to transit its Mac lineup to Intel's x86 chips in 2005, the two companies have shared their visions and plans since then. As it appears, Intel missed the opportunity to develop a chip for the original iPhone (which sales were not high, but which defined the mobile industry for a decade ahead). One of the major problem for Intel in 2005 – 2006 timeframe was to develop a truly low-power chip for Apple by 2007. The company could have altered (or better to say completely redesign) its Atom roadmap and pull-in the lowest-power variation of Silverthorne by a year, or even design something on ARM architecture in 2005 – 2006, but the firm decided not to do anything since iPhone did not promise to become the world’s best-selling smartphone. But in addition to the iPhone, Intel missed a more important opportunity, the iPad, the world’s highest-selling media tablet. Consequently, Intel is now behind its rivals in the new world of smartphones and slates.

Steve Jobs' biography by Walter Isaacson reveals that Steve Jobs and Jonathan Ive (vice president of industrial design at Apple) started to develop iPad in the first half of last decade and even their patent applications revealed sketches of the iPad back in 2004. While the sketches from 2004 clearly resembled iPad from the outside and somewhat reflected the touch-screen-based operating system, the insides of the tablet remained a mystery.

Originally, Steve Jobs planned to use low-power Intel Atom microprocessor inside the iPad. However, Tony Fadell, the senior vice president of the iPod division at Apple, insisted that the iPad would be ARM-powered although Mr. Jobs insisted that it was "best to trust Intel to make good mobile chips". The history knows what happened next: Apple bought PA Semi chip designer, which created the A4 system-on-chip for the company. Apparently, Steve Jobs was pretty pleased with the result and even told his biographer that Intel was anyway too slow and not too flexible to offer something comparable.

"At the high-performance end, Intel is the best. They build the fastest chip, if you don't care about the power and cost. But they build just the processor on one chip, so it takes a lot of other parts. Our A4 has the processor and the graphics, mobile operating system, and memory control all in one chip. We tried to help Intel, but they do not listen much. We have been telling them for years that their graphics suck. Every quarter we schedule a meeting with me and our top three guys and Paul Otellini. At the beginning, we were doing wonderful things together. They wanted this big joint project to do chips for future iPhones. There were two reasons we did not go with them. One was that they are just really slow. They are like a steamship, not very flexible. We are used to going pretty fast. Second is that we just did not want to teach them everything, which they could go and sell to our competitors," Steve Jobs told his biographer.

Meanwhile, Intel's chief exec Paul Otellini said that Apple and Intel could not agree on the price and on who would control the development. Apparently, Mr. Jobs demanded too much control over design of the x86 iPad chip.

Although the price might not be right for Apple, the advantages of ARM-based A4 and A5 are rather clear: lowest-possible power consumption, high-performance low-power PowerVR graphics core as well as ability to tailor the chip for the iOS and vice-versa. On the other hand, an x86 would allow to develop much more demanding applications for the iOS or even launch Mac OS on tablets providing more features to interested users. Both approaches have their pros and cons and Apple has chosen to go with ARM in order to appeal to consumers looking forward long battery life to consume content and in a bid to and to control everything from the sketches of the silicon to final touches of device itself.

Intel generated more revenue during Paul Otellini's 8-year tenure than it did during the rest of the company's 45-year history. However, the company clearly missed over 600 million Apple iOS-based devices (at $15 a chip, this could have resulted in $9 billion in revenue) as well as the market of ultra-portable gadgets, something that the new chief executive of Intel will have to address.

Tags: Intel, x86, Atom, Silverthorne, Apple, iPhone, iPad, iOS, ARM

Discussion

Comments currently: 11
Discussion started: 05/16/13 11:35:22 PM
Latest comment: 07/18/14 02:27:55 PM
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1. 
Intel gave Mr. Otellini the boot because he failed dreadfully in the mobile space. It didn't matter that he had made megabucks for the company at a time when AMD was spending its R&D moving to a revolutionary new way of computing called the Advanced Processing Unit and thus wasn't as competitive with gap filling products and initial iterations. His past record also didn't matter because the PC market was considered to be shrinking and computing becoming more divergent. What went before was an aberration of history. And Otellini didn't read the signs and didn't listen to the industry soothsayers. So, with Intel in maximum spin overdrive, everyone was told that he was leaving the company because he just wanted to spend more time with his family, even though he had not yet reached the average retirement age for CEOs. And as a consequence of these events, he now sits at home copping even more nagging from his wife.
2 1 [Posted by: linuxlowdown  | Date: 05/16/13 11:35:22 PM]
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2. 
If I knew the lucky numbers. I would be a lottery millionair over night!
0 0 [Posted by: Zingam  | Date: 05/17/13 01:16:26 AM]
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3. 
heheh the avarice of Intel on money lost them from Iphone.
1 1 [Posted by: tbaracu  | Date: 05/17/13 03:48:02 AM]
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4. 
What Mr. Otellini should be more ashamed of, is the practice, under his tenure, of letting laptop OEMs customize the Intel HD graphics drivers, and leaving Intel HD graphics users to fend for themselves when it comes to getting their Laptop's OEMs to update the OEM customizied Intel HD graphics dirvers! 2 out of the 3 laptops that I own, have never had an Intel HD graphics driver update, for the OEM customizied INTEL HD graphics drivers the OEM's installed on these computers! I have tried the have disk method with the driver installs, but it caused stability problems! Intel in its rush to sell a much product as possible, abandoned users of its CPUs/GPUs, to the mercy of the laptop OEMs! Intel you should have required laptop OEMs to use only Intel Generic HD graphics drivers, or required OEMs to keep their Customizied Intel HD graphics drivers updated! By not doing so, The Intel Brand is not very well trusted when it comes to integrated graphics! The only area where Intel does accel (which is not dew to solely Intel's IP) is Intel's CPUs pared with AMD or Nvidia descrete GPUs, and, as some newer APU technology from AMD comes on the market, Intel will be playing catch up for the foreseeable future in the integrated graphics Arena!
5 0 [Posted by: BigChiefRunAmok  | Date: 05/17/13 10:35:54 AM]
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I like this man, very well said and informative
2 0 [Posted by: veli05  | Date: 05/17/13 12:46:52 PM]
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I really really wish I'd known this before I bought my Intel based netbook.
0 0 [Posted by: Zimanodenea  | Date: 05/20/13 02:15:49 AM]
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5. 
"At the high-performance end, Intel is the best. They build the fastest chip, if you don't care about the power and cost. But they build just the processor on one chip, so it takes a lot of other parts. Our A4 has the processor and the graphics, mobile operating system, and memory control all in one chip. We tried to help Intel, but they do not listen much. We have been telling them for years that their graphics suck. Every quarter we schedule a meeting with me and our top three guys and Paul Otellini. At the beginning, we were doing wonderful things together. They wanted this big joint project to do chips for future iPhones. There were two reasons we did not go with them. One was that they are just really slow. They are like a steamship, not very flexible. We are used to going pretty fast. Second is that we just did not want to teach them everything, which they could go and sell to our competitors," Steve Jobs told his biographer.


Based one what I have heard about collaborating with Intel. Jobs is spot on with this assesment lol

2 0 [Posted by: veli05  | Date: 05/17/13 12:44:44 PM]
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6. 
To be fair, he said they had forecasted the cost wrong and the supposed volumes was a lot lower. Given that nobody would have entered into what they believe wasa loss making venture.

If they had understood (hindsight is wonderful) they would need 100times as much and that it could be made cheaper im sure they would have jumped at it.

2 0 [Posted by: Dave Hartnell  | Date: 05/17/13 01:00:21 PM]
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I totally second that but very glad Intel did get this wrong as ARM and all its developers (TI, Qualcomm, Samsung...) are a breath of fresh air in the CPU world.

I am looking forward to a many core desktop chip coming out by someone, maybe nVidia. Strap together 16/32 A57 cores and have the GPU cores able to execute code also, certainly OpenCL 1.2 then kiss goodbye to my money Intel!
0 0 [Posted by: loadwick  | Date: 05/19/13 09:37:46 AM]
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7. 
If intel had helped design and fab'd the custom ARM cores that apple use (they used to have a license) the likes of Samsung/other ARM users/fab's would have struggled to match the might of intels advanced fab foundries

Intel would be a two ton gorilla, instead of just the one ton gorilla they are now
0 0 [Posted by: alpha0ne  | Date: 05/19/13 01:38:47 AM]
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8. 
Even if Intel won this iPhone business, it would have eventually lost it. Intel would have to retool both its fabs and its business model to accommodate for this kind of business. This takes years! Intel would have essentially tanked iPhone in the process.
0 0 [Posted by: Chris D  | Date: 07/18/14 02:27:55 PM]
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