Intel upside down

Intel made a couple of strategic gaffes along the way to being left out of the Apple iPad:

(1) exiting the ARM-based mobile CPU business entirely in 2006 (pre-iPhone)

(2) assuming that PC technology would continue to extend lower & lower into mobile devices

Here is a brief history:

2005: Mini coup for Intel - Apple announces it will abandon PowerPC and adopts Intel across its entire MacBook line. This will go down as the apex of Intel’s reign in computing, as x86 processors own almost every server, desktop, and laptop.

2006: Intel exhibits a level of hubris that is shocking in hindsight—they exit the mobile phone market entirely, selling off a successful ARM processor business (called XScale) to Marvell Semiconductor. XScale had mindshare, scale and design wins, but Intel gave up. Why focus on these PDA/toys when we can win computers?

2007: The iPhone dawns a new age in mobile computing.  Following its startling success, Intel restarts a ‘low-power’ (mobile) device strategy, only this time they take laptop technology (x86), strip it down, and design ‘Atom’. Atom has since come to dominate Netbooks. But Atom has zero market share in cell phones. Once again for emphasis. Zero.

It’s become clear in the last few days that the iPad is a new class of devices. Not the tablet-of-old pushed by Microsoft, but a truly disruptive era of computing, one that bypasses Intel entirely. Intel simply couldn’t fathom that an iPhone class of computers would disrupt PCs from the bottom up, which is exactly what happened.

And it’s not just the iPad. Google Chrome OS tablets won’t run Intel either, because the divide between ARM and Intel is not narrowing. In fact, Netbooks may even ditch Atom in favor of ARM processors (Windows bloat may prevent this). Google wants this to happen with its cloud initiatives running on Chrome OS.

Little known secret - Intel has a dedicated team of people which caters to Apple full time. A private team of Intel folks firewalled from the rest of Intel (per Steve Job’s demands for total secrecy). Not only sales, but also product folks. You can bet Intel’s Atom CPU roadmap was pitched to Apple for tablet-type devices from day 1.

Intel is fighting back using massive R&D dollars to get back in. However, even though Intel Atom CPUs use more advanced process technology (45nm), they lag ARM processors (the Apple A4, nVidia Tegra 2, Qualcomm Snapdragon etc) from less advanced fabs in the area that matters most - performance per watt of power consumption. Simply speaking, this is performance for a given battery life.

Losing the iPad is symbolic of losing tomorrow’s computer, and it looks a lot like mobile computing will pass Intel by in classic disruptive fashion. Tablet computing - as dawned by the iPad - is the first real threat to Intel's hegemony, and you can bet they know that...

Steve Cheney is an engineer with an MBA who is currently an entrepreneur and formerly a programmer, marketer, investment banker, and vc. This post was originally published on his blog and is re-published here with permission.