> 7 months before the iPhone was announced, but presumably way after work had started and Apple had asked Intel for a processor

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.

They didn't have to know that the iPhone would have been an explosive hit, but they should have seen that Smart Phone/PDA like device sales were increasing at 30-50% a year at that time, and there was a definite feeling that this was the future.

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,

> there was a definite feeling that this was the future

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.

I don't want to defend Intel, but Apple's own announced hope at the time of the iphone introduction was to "eventually reach 1% of the phone market".

Apple was just reassuring customers and the market, by telling them that their tiny size and newbie market status was an advantage, not a disadvantage.

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.

I always thought it was a response to other cell-phone makers integrating music-player functionality into their cell phones, threatening Apple's music-player revenue stream.

Me too. Ballmer's reaction to the iphone was not obviously stupid at the time, especially given Microsft's business model of direct enterprise sales.

That at that time would not have been a bad take.

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.

> 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.

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.

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1. https://arstechnica.com/gadgets/2007/04/data-plans-the-barri...

> From what I recall, the original iPhone only supported 2G, while contemporary phones supported 3G.

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".

Think of why the iPhone existed in the first place. It was because Jobs saw the writing on the wall and knew that cell phones were bound to destroy the market for the iPod, Apple's moneymaker. Before making the iPhone, he made the Rokr and Jobs threw massive amounts of resources into the iPhone at large risk to Apple. He bought up the patent for multi touch back in 2005.

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.

One could say "Well Intel's fate was inevitable, they were too entrenched in this traditional business, the shareholders and management would never be able to stomach such a risky shift to a new market" but 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.

> Intel Atom could have dominated the market

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

The first atoms were their own kind with design principles more from the P5 than even the PPro. It was slow. I'm unsure if it was slower than contemporary Arm, but for sure it had a way lower IPC than the Pentium 4.

IMO, ARM won not because it was measurably faster, but rather because there was an ARM based offering all over the spectrum of SoC needs. In the appliance/embedded market Atom was firmly in the high end and yet in pc-ish market Atom was very much low end.

I think you’re missing the broader point. The “netbook” form factor was absolutely on to something, but it failed to deliver. The atom processor is what enabled the form factor, and practically set the trajectory for laptops for next 10 years.

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.

> The “netbook” form factor was absolutely on to something, but it failed to deliver.

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.

Yes, but Nokia, Ericson, Sony and Microsoft could have done it, if it wasn't for their mismanagment.

People also overlook the mobile phone market outside US.

ARM is open. So that means they would have to compete with the whole world both on chip design, and fabbing, for a low power chip, with margins lower than what they are used to.

Sucsess(as measured in valuation back than, not today, that's how managers measure themselves), was far from certain.

Right. Big company disease caused Intel to miss the biggest CPU market and relegated to big metal servers because they got undercut. It’s still a miss for the business and the CEO regardless of how managers/VPs measure themselves. CEOs are supposed to take a longer term strategic view. Since the mobile revolution Intel stock peaked at 2x from before 2007 while Qualcomm has done about 2x better than them. Of course part of that is cellular chips / licensing. But there’s also other CPUs that were competing with Qualcomm. Maybe that’s why Intel didn’t bother to compete (Qualcomm SoC is CPU+cellular if I recall correctly).

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.

>Of course part of that is cellular chips / licensing. But there’s also other CPUs that were competing with Qualcomm. Maybe that’s why Intel didn’t bother to compete (Qualcomm SoC is CPU+cellular if I recall correctly).

Intel had a cellular modem business which they formed in 2011 and sold to Apple in 2019.

4 years after smartphones became a thing. It’s a bit too late and no one really bought their chips in the high end phones.

> Intel had a cellular modem business which they formed in 2011

They acquired* from Infineon. And completely messed it up.

Sadly staying in everything is death by a thousand cuts. It is hard to have all the strategies at once.

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.

It is also a lesson for the cost-cutting that is popular right now. Sure, trim fat and waste - but R&D and and test projects in new areas are important for future potential markets. Keep some of that alive even it currently isn't profitable so that you have paths to future markets.

I mean, Blackberry was huge and the market was still rapidly growing with no signs of slowing down. The addressable market was even bigger since even back then lots of people didn’t have cell phones and the majority were still feature phones (but more and more people were ditching landlines instead).

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.

> ARM is open

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.

Well they also have success in WiFi & Cellular, ironically two markets that Intel also participated in and never succeeded in doing anything, ever. Truly an astonishingly mismanaged company.

I feel that when every management book starts do bring up a company as an example, one should just sell the stocks in 2-3 years. Like Intel and its OKRs.

ARM is not open... You can license the IP.

That wasn't the only poor decision-making they were doing while Craig Barrett was CEO at that time. They also doubled down on the Itanic processor, refused to make a 64-bit x86 CPU until AMD forced them to, and were pushing mega-expensive RAMBUS memory with their power-guzzling P4 processor. Nearly everything they were doing was a bad decision. If anything, it's a case study in why engineers should not be CEOs. (Barrett was an engineer; he was replaced by Otellini who was not, and who turned things around for Intel.)