How Intel Missed the iPhone: The XScale Era

Original Article ↗ Hacker News Discussion ↗

Intel’s decision in the mid-2000s to sell off its ARM-based XScale line and pass on Apple’s early iPhone chip business is reexamined as a pivotal strategic misstep. Commenters weigh whether the opportunity was truly predictable at the time, pointing to thin mobile margins, Intel’s high-margin x86 culture, and bad cost estimates versus the now-obvious upside in volume, ecosystem control, and foundry scale that instead went to players like TSMC, Qualcomm, and ARM. The conversation also revisits the PDA and early smartphone era to argue that even without Apple, someone was going to own the PDA‑plus‑phone space—and Intel’s culture and incentives left it poorly positioned to be that company.

Early Mobile Devices and the XScale Era

  • Several commenters reminisce about early 2000s PDAs (Dell Axim x50v/x51v, HP iPaq, Sony Clie) using Intel XScale.
  • Hardware was briefly impressive: ~600 MHz ARM CPUs, discrete GPUs, good media playback, emulation, and (for the time) usable web browsing.
  • Later devices regressed in clocks, GPUs, and display resolution, and Windows Mobile/CE is widely described as clunky and limiting despite some strengths (one‑handed nav, non‑volatile memory).
  • Workarounds included overclocking, storage cards, Wi‑Fi adapters, and even running Linux/BSD.

How Intel Evaluated the iPhone Opportunity

  • Many object to framing Intel’s choice as obviously wrong at the time, emphasizing hindsight bias and lack of clear data.
  • Others counter that Apple’s iPod success and trajectory made a large mobile play at least worth a serious strategic bet.
  • Otellini reportedly wanted to say yes but rejected Apple’s offer because the requested price was below Intel’s forecasted cost; later he said both costs and volumes were badly misestimated.
  • Commenters note Intel’s culture: finance‑driven, fixated on high margins and $1B+ businesses, wary of uncertainty and of undercutting pricing for existing XScale customers.
  • Intel later burned substantial money on “contra‑revenue” subsidies trying to push x86 into mobile, suggesting recognition of the earlier miss.

ARM, XScale, and SoC Economics

  • XScale was already widely used in PDAs and early smartphones (Palm, BlackBerry, HTC); some argue canceling it was a major strategic error.
  • Others argue XScale was over‑spec’d and too costly for early iPod/iPhone needs, and ARM reference cores plus many vendors meant little moat for Intel.
  • There is disagreement over “no money in mobile SoCs”: some point to Qualcomm and TSMC’s enormous value as clear counterexamples.

Debate Over the iPhone’s Early Impact

  • Strong disagreement on how obvious iPhone’s success was:
    • One side: from launch it was a “Jesus phone,” lines around the block, immediate #2 US smartphone vendor, and Android was radically redesigned in response.
    • Other side: initial sales were modest versus Razr/Nokia/BlackBerry, touchscreens and AT&T exclusivity limited adoption; real takeoff came with 3G/3GS, App Store, and cheaper contracts.
  • Most agree the App Store, full browser, unlimited data, and multitouch UX were eventually decisive, though exact timing and predictability remain contested and somewhat unclear.

Apple, Fabs, and Long‑Term Consequences

  • Apple now designs its own chips but relies on TSMC; several argue TSMC’s early, high‑volume Apple business underwrote its process lead over Intel.
  • Some think if Intel had embraced ARM/XScale for Apple early, Apple might not have gone so hard into in‑house silicon, and Intel might have retained more relevance in mobile and possibly Macs.
  • Others argue Apple’s drive for control and margins meant it would eventually replace any external chip designer regardless.