Intel Stopped Being Paranoid Years Ago

One of the first business books I read was the autobiography of Lee Iacocca titled “Iacocca: An Autobiography” back in 1985. In fact, I was a hugh fan of Iacocca because of that book and when he died last year in July, I didn’t expect my cousin to send me a message the next day:

That book sparked my interest in reading about businesses and people connected to those businesses. The next book I read was Made in Japan: Akio Morita and Sony, the life story of Akio Morita who started Sony Electronics.

However, the first real business management book I read was in college from Andy Grove, titled “Only the Paranoid Survive.” At that time Intel was on a high, their computer chips were bundled with Microsoft’s Windows operating system and together they ruled the personal computer market. The joke was what Intel giveth (with processing power), Microsoft taketh (with buggy and slow software). Intel could do no wrong.

The book title resonated with me and pretty much everyone else. Basically, if you were not paranoid/worried about the markets, the competition or your product you would be finished. That worked for Intel for many, many years….till it stopped working for them.

If you look around today there are 3 big baskets where computer chips are used – mobile phones, laptops/desktops and data centers. Bit by bit, Intel is losing marketshare or worse not even playing in certain markets. Let’s go through all 3.

Mobile Phones

This by far has to be the biggest miss for Intel, they are completely absent from one of the biggest consumer electronics growth stories ever. Back in 2005/6 a year before the iPhone launched, Paul Otellini the CEO of Intel decided to pass on making chips for the iPhone because they felt it was not worth their time and effort. They were “all-in” for personal computers, in fact they had just sealed a deal in June 2005 to help Apple switch to Intel-based Macs and they felt that was their core strength and the future of computing. When Paul Otellini retired from Intel he gave several interviews on how they blew the opportunity to be inside the iPhone and potentially changing the course of Intel.

Laptops & Desktops

As I mentioned, back in June 2005 Intel was on a high because they just struck a massive deal to supply computer chips to Apple. Previously, Apple computers ran on the PowerPC chip but those chips were slow compared to what Intel offered and hence Apple decided to switch. And, yet again Apple has decided to switch the chips inside their computers. It’s anticipated next week that Apple will unveil it’s newest computers with Apple designed chips that use the ARM64 architecture. Which means goodbye Intel, and yet another hit to the revenue of Intel. I predict this will also happen with Windows machines that will be powered by ARM64 chips. Which means they will lose even more market share in the laptop and desktop market.

Data Centers

Last month, when Intel announced their earnings it was clear even their data center sales were getting affected. Amazon Web Services (AWS) is the largest cloud provider and buyer of these Intel chips but even they have been working on their own chips. The AWS Graviton line of processors are custom built by Amazon Web Services using 64-bit Arm Neoverse architecture.

Instead of paying Intel for their intellectual property and manufacturing, everyone now wants to license the architecture from ARM and then bid out the making of the silicon wafers to Taiwan Semiconductor Manufacturing Company (TSMC), GlobalFoundries or Samsung Foundry. This has put the pressure on Intel to deliver and they have failed. Hence everyone is bailing on Intel.

In my estimate, Intel stopped being paranoid somewhere in 2005 when they got the large Apple order for computers and let the iPhone team fend for themselves. Probably, one of the dumbest corporate moves of all time.

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