Intel’s Paul Otellini: Lack of Chip for iPhone, iPad Was My Worst Mistake

Intel’s Outgoing CEO Regrets About Mission Opportunities with Apple iOS

by Anton Shilov
05/16/2013 | 07:27 PM

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.