Must-read: Ben Thompson: “Andy Grove and the iPhone SE”

Must-Read: Invest like mad in your technology drivers–even if it looks as if they are not the most profitable. But, conversely, don’t keep pouring money into things that used to be technology drivers but are no longer. And keep your mind open and place many bets as to what your future true technology drivers will be:

Ben Thompson: Andy Grove and the iPhone SE: “While [Gordon] Moore is immortalized for having created ‘Moore’s Law’…

…the fact that the number of transistors in an integrated circuit doubles approximately every two years is the result of a choice made first and foremost by Intel to spend the amount of time and money necessary to make Moore’s Law a reality… and the person most responsible for making this choice was Grove…. Grove [also] created a culture predicated on a lack of hierarchy, vigorous debate, and buy-in to the cause (compensated with stock)…. Intel not only made future tech companies possible, it also provided the template for how they should be run….

Grove’s most famous decision…. Intel was founded as a memory company… the best employees and best manufacturing facilities were devoted to memory in adherence to Intel’s belief that memory was their ‘technology driver’…. The problem is that by the mid-1980s Japanese competitors were producing more reliable memory at lower costs (allegedly) backed by unlimited funding from the Japanese government…. Grove soon persuaded Moore, who was still CEO to get out of the memory business, and then proceeded on the even more difficult task of getting the rest of Intel on board; it would take nearly three years for the company to fully commit to the microprocessor….

Intel today is still a very profitable company…. [But] the company’s strategic position is much less secure than its financials indicate, thanks to Intel’s having missed mobile. The critical decision came in 2005…. Steve Jobs was interested in… the XScale ARM-based processor… [for] the iPhone. Then-CEO Paul Otellini….

We ended up not winning it or passing on it, depending on how you want to view it. And the world would have been a lot different if we’d done it…. 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.

It was the opposite of Grove’s memory-to-microprocessor decision: Otellini prioritized Intel’s current business (x86 processors) instead of moving to what was next (Intel would go on to sell XScale to Marvell in 2006), much to the company’s long-term detriment…

March 31, 2016


Brad DeLong
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