Intel Missed a Chance to Make Processors for the iPhone: Otellini

Paul Otellini said Apple approached Intel about making the chip for the first iPhone, but that it didn't make financial sense at the time.

Intel is a $53 billion company in desperate need of a strong mobile play, and according to former CEO Paul Otellini, he let a golden opportunity slip through his fingers several years ago.

Speaking to The Atlantic as he prepared to step down as Intel’s top executive, Otellini recalled the time when Apple officials—then in the process of developing what would become the iPhone—approached the giant chip maker about making the processor for the device. Intel already was making chips for Apple’s Mac products. However, not realizing the ripple effect the then-unnamed mobile device would have on the industry, he passed on the deal, saying the financial numbers didn’t seem to make sense.

"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," Otellini told The Atlantic in a story published May 16. "The thing you have to remember is that this was before the iPhone was introduced and no one knew what the iPhone would do.”

Apple officials were interested in a particular chip, and let Intel know that they would only pay a certain price for it, and nothing more.

“[T]hat price was below our forecasted cost,” Otellini said. “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."

Now Intel is aggressively trying to push its way into a mobile device space where the bulk of smartphones and tablets run on systems-on-a-chip (SoCs) designed by ARM and made by the likes of Samsung, Qualcomm, Apple and Nvidia. Battery life on these devices is crucial, and Intel has been working to drive down the power consumption of its processors. ARM-based chips have been much more energy efficient than Intel processors.

Intel is rapidly innovating on its low-power x86-based Atom platform, and so far has some smartphones powered by its chips, though those devices are sold overseas. Intel executives are expecting that upcoming Atom SoCs, which will be built on a new microarchitecture, dubbed “Silvermont,” will help the company gain more ground in the mobile device space. Silvermont represents the first new microarchitecture for Atom since it was introduced five years ago and aimed at the then-healthy netbook market.

Silvermont will offer five times lower power consumption and three times the performance of current Atom SoCs, which are based on the original “Bonnell” microarchitecture. Devices powered by the upcoming 22-nanometer “Bay Trail” Atom SoCs for tablets and “Merrifield” chips for smartphones will begin coming to market later this year and early 2014. During a press conference earlier this month to talk about the microarchitecture, Dadi Perlmutter, executive vice president and general manager of the Intel Architecture Group and Intel’s chief product officer, said Silvermont will enable Intel “move into mobile in a big way.”

“We’re breaking the myth that ARM can do things that Intel cannot,” Perlmutter said.