OUTGOING INTEL CEO Paul Otellini said the firm passed up the opportunity to make chips for Apple's iPhone.
Intel, which has a miniscule presence in smartphones and tablets, hopes that its upcoming Merrifield Atom chip will help it finally gain a foothold in those lucrative mobile markets. However on his last day as Intel CEO, Otellini said in an interview that Intel passed up the chance to supply Apple with chips for the first iPhone.
Otellini said Intel passed on the opportunity to supply Apple because the economics did not make sense at the time given the forecast product cost and expected volume. He told The Atlantic, "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."
Otellini continued by saying that his gut told him to say yes to Apple's iPhone business. However Intel is known for its methodical way of working and if, as Otellini said, the numbers didn't seem to add up, it would have been hard for gut instinct to have driven such a decision, especially since Intel covets its 60 percent product margin.
People might question Otellini's comments about not realising how important and big Apple's iPhone would become. Apple's original iPhone was quite clearly years ahead of anything that was on the market and it managed to sell extremely well despite a phased rollout, being locked to one or two mobile operators per country and being considerably more expensive than high-end feature phones.
Otellini's successor, Brian Krzanich, faces making up for lost ground in the smartphone and tablet markets while appeasing investors worried about the costs associated with fabbing chips that are competitive. That Intel turned down Apple's iPhone business is unlikely to endear it to the fruit themed toymaker in the future. µ
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