Intel's Outgoing CEO Says He Passed On A Chance To Get Intel Chips Inside The First iPhone

steve jobs paul otelliniSteve Jobs and Paul Otellini on stage at MacWorld when Apple announced Intel chips were coming to Macs

When Steve Jobs unveiled Apple’s first Intel-powered Macs at a January 2006 event in San Francisco, Intel CEO Paul Otellini made a dramatic entrance, emerging onstage from a cloud of smoke wearing a “bunny suit,” the protective outfit workers wear in Intel’s semiconductor fabrication plants.

Otellini didn’t often engage in such bizarre pageantry during his 8-year tenure as Intel CEO, which officially ended Thursday. But the Apple Mac deal was a major coup for Intel, and the bunny suit helped Otellini drive that message home. 

Now, as Otellini heads into retirement, he’s talking about an even bigger deal with Apple that he wasn’t able to close.

When Apple was working on a prototype for the first iPhone, it approached Intel about making the processor for the device. But Intel passed on the opportunity because it didn’t make sense financially, Otellini told Alexis Madrigal of The Atlantic in an interview published Thursday

“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,” Otellini told Madrigal. “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.”

While Otellini kept Intel on a profitable path, he wasn’t able to figure out how to make Intel relevant in smartphones, the majority of which are running ARM chips. Intel is still trying to figure out its mobile strategy, and incoming CEO Brian Krzanich said Thursday that he plans to fix this

Of course, Otellini isn’t the only tech executive who didn’t anticipate the impact the iPhone would have. Shortly before Apple launched the iPhone, Microsoft Steve Ballmer said it had “no chance” of gaining meaningful market share. 

Otellini told Madrigal his gut reaction was to pull the trigger on the Apple mobile deal. But he didn’t, and so it’s likely every time Otellini sees someone using an iPhone, he’ll cringe a little bit inside. 

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