Intel’s Layoffs Stem From a Bad Bet 10 Years Ago ↦

Intel, the world’s largest computer chip maker, is still doing alright. In its most recent earnings announcement, for the first quarter of 2016, the company announced profits of $2 billion. Unfortunately, the results were paired with a quite different announcement: that Intel would be laying off up to 12,000 employees in order to “to accelerate its evolution from a PC company to one that powers the cloud and billions of smart, connected computing devices.”

Hidden in that language is an admission that Intel doesn’t already dominate the market of “smart, connected computing devices” the way it does dominate the PC CPU market. Timothy Lee of Vox highlights one bet that Intel made about 10 years ago that explains why:

Intel turned down an opportunity to provide the processor for the iPhone, believing that Apple was unlikely to sell enough of them to justify the development costs.

Oops.

Really, though, that bet was just the logical outcome of an even earlier bet that has cost Intel dearly in the era of smartphones. Intel’s mobile chip line—Atom—hasn’t gained much traction in the smartphone market where it faces stiff competition from ARM processors. ARM has been designing low-power processors for decades and licensing its designs to chipmakers. In fact, Intel owned an ARM chip making business called XScale but sold it in 2006:

Intel sold XScale because it wanted to double down on the x86 architecture that had made it so successful. Intel was working on a low-power version of x86 chips called Atom, and it believed that selling ARM chips would signal a lack of commitment to the Atom platform.

It’s important to note that Intel didn’t fail to see a mobile revolution coming. They just bet that the revolution would be powered by x86 chips. But x86’s unassailable dominance in the PC market hasn’t helped it in the mobile market, because smartphones came with entirely new platforms (iOS and Android) that made it easy to choose ARM over x86. Intel decided to put all of its eggs in the x86 basket instead of continuing to hedge its bets with XScale/ARM. Now it is paying the price for that decision.