> Thirdly, the success of an Apple phone would not have been hard to predict. In 2006 Apple sold nearly 40 million iPods.
I don't like how this whole article is framed as how obvious it was that Intel made a huge mistake. Hindsight is 20/20, there was no such data available.
It was not predictable that the iPhone would be a success, especially not to a degree of Intel sacrificing every profit calculation in mere "hope" of huge volume later.
The numbers were there for the iPod. Intel could have just pitched to become the SoC-supplier for the iPod and didn't do it. They surely crunched the numbers several times and it didn't work out.
The first iPhone was then built on the iPod platform with an Infineon modem, so the better question to ask is probably: Why wasn't Intel interested to supply the CPU for the iPod?
No, it wasn't obvious. But it coming from Apple, who choose to go after the portable music player market ignoring the new hotness PDA and that ipod segment becoming the majority of its market cap. When that happened, as the CEO of #1 cpu maker, you have to spend more than a cursory effort into what is Apple's bet on this. Even to me, a nobody, had guessed at the iphone rumor, before the magically reveal, that it will be become Apple's main product, way surpassing even the ipod. Apple choosing to ignore the PDA market gave me an almost certain conclusion that they only ignored it due to technical challenges to produce a rivaling product that they were proud of and after years of wait, they were finally able to produce it.
So yes, hindsight is 20/20, but as CEO of intel, he failed miserably from not putting more effort into the decision making.
> Even to me, a nobody, had guessed at the iphone rumor, before the magically reveal, that it will be become Apple's main product, way surpassing even the ipod.
At the time of discussion with Intel, it was not an explicit phone project, it was _A_ Apple project. Over the years, Apple spent millions on projects to disrupt some markets which either didn't materialize at all or ended up not disruptive/competitive in the market.
There are countless examples of this. Some Moonshot where Apple thought they knew better what the market want to just figure out that it doesn't work.
The project Steve Jobs was talking about could as well have been one of THOSE projects, and Apple tried to get a established and well-working component at a price which would potentially destroy Intels business with its other customers.
> but as CEO of intel, he failed miserably from not putting more effort into the decision making.
But who said that he didn't put effort in the decision making? According to Otellini himself Apple was demanding a price lower than Intel's COST.
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.
Which was already the case at that time, with Blackberry, Palm and HTC dominating that market using Intel XScale.
Intel tried to corner that market by deviating from ARM with their custom MMX architecture. It worked with Windows PocketPC as a OS-supplier, but HW-vendors with their own OS didn't want to limit their supply-chain to a single CPU-platform.
But yes, their belief in x86 being superior surely clouded their judgement on XScale's future potential
And they would have been just as shitty as the Blackberry. Hell, even Google had to go back to the drawing board with their Android prototype because they still thought a physical keyboard on a phone was king....right until they caught a glimpse of the first iPhone.
i loved the blackberry keyboard and would take it anytimes over this fucking iphone keyboard. The iphone keyboard is a step backwards. people like haptic feedback.
The middle of the bell curve, which dominates the market, has a need for drool-proof interfaces that many of the sort who frequent HN and similar interest communities do not.
I think the gap was market size estimation. Intel was (is?) famously not interested in businesses that can’t generate $1B of incremental revenue in the first year or two.
iPhone was predictably huge, but I don’t think it was a sure thing it would be this huge. And Intel’s finance-driven culture probably did the math and decided it was better to pass because of the uncertainty. Finance hates uncertainty.
And of course by the time a market exists for that dollar figure, Intel has been beaten hopelessly, such that there is no hope for as stodgy and apathetic Intel is culturally.
This is what monopolies do, it breeds laziness in the good days, and as a company backslides on the morass of apathetic incompetent mbas that settled into their middle management Machiavelli fiefdoms, it becomes a clinging game to make retirement before layoff
yeah, but according to the article it wasn't even clear at that point that it's a phone project. It was too early to even make such predicitions.
At that time, it could as well have been Apple's attempt to a build an Apple TV (which never materialized), a Set-Top-Box (which was reworked for years to then end up as a iPhone-in-a-box AppleTV), a Premium Wi-Fi network, a game console,...
Don't forget that Apple's previous phone effort in 2005 was a collaboration with Motorola on the ROKR, aka "iTunes Phone", which was a normal motorola phone except it could sync with iTunes and play media like an iPod
I agree. Apple was ascending again and everything they did seemed to be a hit. I think the real question is how large of a bet did Intel really need to make. No it might not have made sense on immediate ROI alone, but Intel had only to defend its position.
Intel misjudged how much the part would cost to make. That mistake led to a huge missed opportunity.
> Even Otellini betrayed a profound sense of disappointment over a decision he made about a then-unreleased product that became the iPhone. Shortly after winning Apple's Mac business, he decided against doing what it took to be the chip in Apple's paradigm-shifting product.
"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...
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...
And in hindsight, the forecasted cost was wrong and the volume was 100x what anyone thought."
> Intel misjudged how much the part would cost to make
I just don't buy it. If Intel realized in hindsight that they could price out a competitive chip, why didn't they sell it to Android manufacturers? So much effort goes into making us lament a world where Intel iPhones existed, but I don't even see the appeal. Intel didn't have a vested interest in ARM (an attitude persisting to this day), they weren't going to acquiesce to Apple's desired margins then or now, and Apple would always have the logical opportunity to cut out their chip middleman. It's about as appealing as a shit sundae sat on a trap door.
> That mistake led to a huge missed opportunity.
Again, was it really that huge? After licensing cost to ARM, core design fees and the bulk deals worked out, I can't see Apple allowing Intel room to breathe. From a certain perspective, it almost seems like Intel never had any desire to genuflect for Apple and only signed the Mac deals to proliferate their existing design catalog. I can't say for sure what the financials worked out to be, but considering Mac market share at the time it makes sense why Intel wasn't super motivated. If we could look at a modern iPhone bill-of-materials, I don't think either of us would feel bad for Intel.
Arguably, TSMC being Apple's preferred fabricator is why it has a current market cap 10x larger than Intel.
Apple probably ends up getting chips only slightly above cost from TSMC. (It pays $18 B a year, which is pretty low for the CPUs in roughly 400 million phones, watches, tablets, Macs, AppleTV, etc. it sells every year) but it also pays well in advance the costs for building the fabs for those chips. This gave TSMC the scale needed to be the world's leading semiconductor manufacturer, which means it simultaneously has lower costs from economies of scale, as well as more pricing power, from being able to offer leading edge nodes first.
Sure, but also let's not pretend like Apple would pay the same amount for 14nm++++. Even if TSMC didn't exist, Samsung could have beaten Intel on a density roadmap. The looming possibility (if not inevitability) of Apple designing in-house was casting a shadow even then, and today it only makes less-and-less sense mourning the separation of both companies. They wanted different things, and Intel didn't have to rely on TSMC-level density to make their case.
It's not like the Core products that went into Macs - making iPhone chips is a bespoke, ground-up production. It barely makes sense for Apple to insist on using Intel fabs unless they're heavily insecure about outsourcing their supply chain. It makes absolutely no sense at all for Intel to design ARM chips when they don't own an architecture license and would ostensibly only purchase one to make Apple happy. Again, I feel like this entire "lament" is manufactured by Apple fans eager to rewrite history with Apple making generous offers to domestic American businesses. In reality, Apple's endless desire for hardware margins drove them to dictator-states and third-world manufacturing hubs to meet their quota. It's okay for us to pragmatically admit Apple never had any business with Intel, and Intel was right not to convince them otherwise.
If Apple went with Intel from the beginning I doubt they would have ended up developing their own chips and they'd probably be just stuck with x86 on Mac XSScale/whatever on mobile.
> ARM chips when they don't own an architecture license and would ostensibly only purchase one to make Apple happy
They did certainly own one. XScale was a custom core and not licensed from ARM. IIRC pretty much all high-end PDAs used them so it would have been the default/safe choice for Apple had Intel decided not to abandon it.
Is there any information about those terms? Could they really have been worse than whatever deal with Apple has with ARM these days?
The main downside with ARM/XScale is that Intel would be forced to compete with all other manufacturers and wouldn't have been able to charge their monopolistic/oligopolistic margins on their products. Of course Intel being Intel they could have just added enough proprietary extensions to solve that.
> Apple's endless desire for hardware margins drove them to dictator-states and third-world manufacturing hubs to meet their quota
Sure. But Apple wasn't really in a position to do that back in 2005-2007. It took years for them to build that because they could do it iteratively, I doubt Intel would have allowed them as much freedom as Samsung though.
>I don't think either of us would feel bad for Intel.
Except TSMC? It is not like Intel wont have its margin in making a chip for Apple. It will just be much smaller margin, or margins of modern day Fabless Soc Design company. The problem is Intel misjudged the volume, which ultimately meant they also miscalculated the whole OPex and Capex equation. And Intel dont want to do low margin business ( by their standards ).
Most of your statement suggest Intel would have to make a loss in working in Apple. And yet TSMC has been enjoying their ride purely because of Apple.
TSMC doesn't have to pay ARM licensing costs or design chips for Apple. Their relationship is markedly different from what people are suggesting here, and is profitable because they more or less require Apple to make upfront investments to reserve upcoming nodes.
Intel's margins made sense when they were selling pre-designed x86 CPUs for use in Macs. It expressly does not make sense when a company notorious for loving low margins asks you to design and manufacture a chip you won't be legally allowed to use anywhere else. Again - Intel was absolutely correct to recognize Apple's attempt to cuck them here.
Intel already had an ARM license they had used to create their XScale line.
They decided to sell that line of business off to Broadcom instead of fabbing a chip for Apple.
Later they decided their failure to enter the mobile device market was a big enough error that they burned through about a billion dollars in a failed attempt to push x86 as a viable alternative to ARM for mobile devices.
Pretty much all PDA's (even devices like the first gen Kindle) were using Intel's ARM chips. There is no reasons to believe that whatever Apple needed would somehow have been extremely different from what their other clients used (and it's not like Apple had that much bargaining power those days anyway).
> Intel was absolutely correct to recognize Apple's attempt to cuck them here.
I see it the other way around. Unless Intel somehow severely fucked it up (not a distinct possibility, just Intel being Intel) Apple would probably be stuck with their chips both on mobile and laptop/desktop to this day.
>
I just don't buy it. If Intel realized in hindsight that they could price out a competitive chip, why didn't they sell it to Android manufacturers?
Intel later attempted to bring x86 SoCs to (Android) smartphones (for example the ASUS ZenFone 2 was x86-based), but at that time Arm processors were already quite established in the Android ecosystem, so this attempt was a commercial failure.
Which really further proves Intel's point - they don't want to design phone chips. They wanted to (and did) ape off old nodes for nearly a decade, sat on the same designs and never really competed for the mobile market. There wasn't a world where Intel pays for an ARM architecture license, designs Apple's cores, and then gets cheated out of a fair price in the dealmaking room. It's not worth it for them, had Intel signed onto such an agreement they'd only be guaranteed to cuck themselves in the future.
We can argue for or against Intel acquiring an ARM license in an alternate reality, but truth is they don't care. Apple wanted to turn them into something that would never work, and even if they got what they wanted, Apple's current supply-chain squeeze would have obviated any chance of Intel sticking around.
> There wasn't a world where Intel pays for an ARM architecture license, designs Apple's cores,
They had an ARM license and they had their own high-end cores that pretty much all PDAs used. In the early 2000s if you wanted a high-end ARM chip Intel was the default choice.
> We can argue for or against Intel acquiring an ARM license in an alternate reality, but truth is they don't care
Well as I said they already had one in our reality and could have easily ended up in the position Qualcomm is now if they played their cards right (well realistically in a better position because Qualcomm historically struggled keeping up with their own core designs and ended up switching to Cortex while Intel had a significant head start).
You're quoting all the stuff TFA tries to debunk. Intel simply didn't have anything to offer at that point. XScale already lost edge and about to be sold, a matching x86 chip not on the horizon yet.
Intel was perfectly capable of fabbing the ARM chip Apple wanted.
They just screwed up the cost to manufacture estimate which led them to make a bad call.
That's straight out of their CEO's mouth in an interview, so there isn't anything to "debunk".
Later, they would attempt to correct the error by selling x86 chips way below cost in a failed effort to break into the mobile device market.
> In order to make these platforms viable for the low-end and mid-range of the tablet market, Intel provided system vendors with "contra-revenue" subsidies. These platforms simply required an expensive set of surrounding components to work, so Intel "made up the difference," so to speak, to customers who used its platforms with subsidies.
This program likely cost Intel, and its stockholders, in excess of a billion dollars.
The PDA/Tablet market was a reasonable size, the XScale CPUs were the highest performance ones in this sector, Intel could have seen that this market would grow.
In 2006, Intel supplied their XScale design to Palm for the Treo 700, to Blackberry for the Pearl and Curve AND to HTC for use in the XDA/MDA Windows Mobile line, in 2006 arguably the much bigger wins as all those were established constantly-growing product-lines already on sale globally.
Apple demanding a (probably much) lower price-point to have the SoC applied in a mysterious unknown project without a volume-commitment could as well have destroyed the business and profit-margin for the entire Xscale business for Intel and its other customers...
There's no reason for other customers to strangle Intel or move (again) to TI OMAP platform when they find that Apple as a new entrant in their market got favorable terms from one of their suppliers...
In 2006, Intel has just won back Palm from TI and were under incredible pressure from Qualcomm who had their MSM7200 SoC in the pipeline (which integrated both CPU and Modem in a single low-power package).
> Intel often cuts prices to favored customers to win business, for example they did so for the original Xbox CPU, to prevent an AMD from being used.
There's "cutting prices" and then there's selling BELOW COST, without a volume-commitment from the customer for long-term break-even...
The Atlantic article on the interview with Otellini (which this article linked to), was very clear that Otellini wanted to say yes to the iPhone project but was swayed by data:
> "The lesson I took away from that was, while we like to speak with data around here, so many times in my career I've ended up making decisions with my gut, and I should have followed my gut," he said. "My gut told me to say yes."
It's not even sacrificing profit; it's actively reducing profits by selling at a loss.
Did you miss the part of the quote where he shares that Intel's cost estimate was wrong?
Also, after the magnitude of their error to get in at the ground floor sank in, Intel had no problems with selling x86 chips at a loss trying to break into mobile devices.
I didn't miss that part of the quote. And no it would make no difference to Otellini or to the discussion in this thread because he also didn't know the estimate was wrong when he made the decision.
Yes, but that's just an outcome of Intel's/Otellini incompetence (in that specific case) rather than anything else. He used bad data to make an (arguably) bad decision.
The iPod Classic when the iPhone came out had a CPU estimated to run around 80 Mhz vs. a 600 Mhz chip underclocked to 400 Mhz in the original iPhone. The software is also completely different. They didn't build it on the iPod platform at all, though I believe that was considered in the early stages of the design.
Apple used a newer generation of Samsung's CPU used in the iPod to develop both the iPod Touch as well as the iPhone, both introduced in 2007.
That's also a reason why the iPhone was not designed around a more power-efficient SoC which combined the CPU and the cellular Modem into one package: The Modem was the add-on to the architecture which turned the iPod Touch into that exclusive Phone they built for AT&T.
> Apple used a newer generation of Samsung's CPU used in the iPod
I mean, that's true only in the same way as your phone uses a newer generation of the CPU in your washing machine (these days, both are likely to contain ARM cores of some sort). They were both ARM SoCs made by Samsung, but the relationship kind of ends there; totally different ARM core, totally different peripherals, totally different everything.
That's not what I'm saying. They developed the next generation iPod on the next generation of their iPod CPU supplier platform. And then they added a modem and made it a phone.
They literally utilized their existing iPod supply chain to build the core BOM of the product.
The pre-Touch iPods (the iPod Touch only came out after the iPhone) used very small chips; this just wasn't an area Intel had an offering in at all, and it would have been very low margin.
> The first iPhone was then built on the iPod platform
Eh? No it wasn't. The iPod that existed when the iPhone came out was an 80MHz ARM7. The Touch (a 400MHz ARM11) came out a few months after the iPhone, and was essentially an iPhone with the cellular equipment stripped out.
> I don't like how this whole article is framed as how obvious it was that Intel made a huge mistake. Hindsight is 20/20, there was no such data available.
Possibly because Otellini framed it as such?
The latter part of the article answers your other points.
Otellini's gut feeling was to go for it, the numbers didn't pencil and he decided not to and then when it went on the market the volumes were two orders of magnitude higher than estimated. Should've went for the reality distortion field... as you said, hindsight.
In 2006, Intel supplied their XScale design to Palm for the Treo 700, to Blackberry for the Pearl and Curve AND to HTC for use in the XDA/MDA Windows Mobile line, in 2006 arguably the much bigger wins as all those were established constantly-growing product-lines already on sale globally.
Apple demanding a (probably much) lower price-point to have the SoC applied in a mysterious unknown project without a volume-commitment could as well have destroyed the business and profit-margin for the entire Xscale business for Intel and its other customers...
> Apple demanding a (probably much) lower price-point to have the SoC applied in a mysterious unknown project without a volume-commitment could as well have destroyed the business and profit-margin for the entire Xscale business for Intel and its other customers...
One of the key premises of the article is that Apple likely didn't know it was bidding for the iPhone and the decision was taken on that basis.
Why is why saying 'Intel turned down the iPhone' is problematic.
Hindsight is also where you can fudge the numbers to justify your mistakes. Whenever you're calculating things, there's always more optimistic and more pessimistic assumptions. Given that competitors were able to supply Apple, it seems slightly dubious for Intel to say that there was no way it'd be profitable no matter what the volume.
Given Intel's fat margins at the time, it seems like a more likely explanation is that it wouldn't meet their margin expectations and that they wanted to keep showing their investors the great results they'd been used to in the desktop/server/laptop markets that Intel was truly dominating at the time.
Also, when you're a company, you have limitations on how much you can do. You can hire more people and build more fabs, but it can be hard to grow your capacity. Even looking at TSMC, Apple has been using all of their 3nm capacity for the past year. If Intel was thinking about where to allocate its scarce resources (whether that be engineers, fab capacity, etc.), it might make more sense to concentrate on the areas where you're going to have a significant advantage and higher margins - unless you really know that Apple is coming out with something world-changing, which you wouldn't know in advance. Intel was still making enormous gains in the x86 market at this time and giving users big reasons to keep upgrading their machines. 2008-2010 Intel doubled their performance. The point is that there was certainly an opportunity cost to betting on Apple's new mystery device where they wanted a low-margin chip and at the time Intel's x86 business was booming.
I think there can be other issues as well. Why didn't Intel become the iPod SoC? Maybe Intel didn't have such a low-spec'd part for that purpose. The XScale processors were higher spec'd and Apple certainly didn't need that kind of speed for an iPod. Even with the iPhone, the article notes that the Cortex A8 designs were closing the gap with Intel's XScale, but the iPhone didn't use a Cortex A8 until the iPhone 3GS in 2010 (the original and 3G used older ARM designs). So part of the issue might have been that Intel's XScale processors were powerful beyond what Apple wanted to pay for at the time and it would have cost Intel money to make what Apple wanted (a low spec processor) while others already had that available.
I think it's also hard to say that this decision meant that Intel lost out on the iPhone. Realistically, if Apple was going with an ARM architecture, Intel would have lost the iPhone in a few generations anyway. It's not like Samsung got to keep Apple's iPhone CPU business. Maybe Intel could have kept Apple's business with heavy investment in XScale, but Apple bought PA Semi in April 2008 (less than a year after the original iPhone launch). So it seems like Apple was looking to build their own processors even before the iPhone became huge (the original iPhone only sold around 7M units while iPods were selling around 50M/year at the same time). Even if Apple had chosen XScale, Intel probably would have lost the iPhone business.
And Intel probably wouldn't have made up for it on the Android side. Qualcomm's control of CDMA (important for the US) and subsequent domination of high-end modems was used to reinforce their CPU business. Maybe Intel could have overcome that, but we've seen that modems are a hard business - Intel failed in its modem business and while Apple has seen huge success in their CPU business, they haven't had the same success in modems. To put it in perspective, Apple bought PA Semi with 150 employees in 2008 and 4.5 years later had new custom Swift cores in their A6 CPUs. Apple bought Intel's modem business with 2,200 employees in 2019 and 5 years later they'll be introducing the iPhone 16 still on Qualcomm modems.
So did Intel truly miss out on the iPhone? Maybe somewhat. However, it kinda sounds like Intel's XScale business was too high-end and even if Apple had selected XScale, they were still going to be making their own CPUs given that Apple could license the ARM architecture (unlike x86). There certainly was some space for Intel, but it would have been a difficult fight even if Intel were committed to it. Qualcomm's strategy of tying together its patents, CPUs, and modems to reinforce each other is hard to overcome.
In hindsight, sure: the mobile market would have been worth fighting for. But it seems like it would have been a tough market to crack into given what Intel had (a processor too high-spec'd for what the market wanted at the time) and the fact that vendors could easily switch away from Intel to any number of other ARM manufacturers, including ARM's reference cores. If Intel had bet big on mobile, they probably could have made it a good business for them, but it would have been a big gamble for a market without good barriers to entry and where competitors like Qualcomm might have their own barriers.
> So it seems like Apple was looking to build their own processors even before the iPhone became huge
So but possibly only because they had no alternatives. After all building your own chips is a huge long-term investment with all of risk. Intel fully committing to XSCale would probably have significantly altered that calculation.
> license the ARM architecture (unlike x86).
They still had to design their own cores which isn't cheap or straightforward. Something even Qualcomm struggled a lot with (and ended up failing at).
> So it seems like Apple was looking to build their own processors even before the iPhone became huge (the original iPhone only sold around 7M units while iPods were selling around 50M/year at the same time).
This is almost certainly true once they decided that iOS was going to be based on MacOS. Those software design choices had to have been based on a very aggressive hardware roadmap
To be clear the article doesn’t frame it as being clear it was a huge mistake at the time - rather that it’s clear now - and seeks to explain why that decision was made.
>I don't like how this whole article is framed as how obvious it was that Intel made a huge mistake. Hindsight is 20/20, there was no such data available.
Intel is a big reason things are so great, but also so crap, in computing.
Try to remember, the computing revolution didn't start in the 21st century. It's just got incredibly insane, in the 30 years of personal computing.
>Why wasn't Intel interested to supply the CPU for the iPod?
Because Intel and Apple had beef, long-since, already. The iPod was just another mp3 device, until - suddenly - it wasn't.
The writing on the wall for personal computing has been there for all of the computing pioneer companies .. the fact that Intel and Apple didn't get connected, is as much about the fact that these people were really in competition with each other from the beginning.
Apple was always going to own its own fabrication capabilities. From the outside of the box, all the way in.
Intel wanted all the other boxes, not just Apples, too ..
> Apple was always going to own its own fabrication capabilities
I'm not sure that was a foregone conclusion back in 2005-2007. If anything Apple was forced to design their own chips because nobody else was able to offer what they wanted. M-series is a thing because Intel couldn't build the low-power/higher-performance CPUs that Apple wanted.
And Apple only decided to own its chip design-capabilities after the iPhone became a smashhit and Steve Jobs felt betrayed because Samsung used the same ARM CPU-architecture to build the first Galaxy S Smartphone...
It's anyway a big claim that Apple was always somehow competing with everyone in the market. That's the company which rebranded HP Laser Printers, made an HP-branded iPod, made an iTunes phone with Motorola, just moved from IBM PowerPC to Intel for their PCs (!), decided for a while to not make a 5K display but let LG build an official one instead, pushed LaCie as an external HDD partner, etc.
Apple always had ambitions to "wow" with its customized thoughtful products, but before the "iPhone money" they barely ever had enough order-volume to dominate a supplier...
If it wasn't the iPhone, it would have been something else. The logic that drove the decision and not the end result was the undoing of Intel and the logic would have remained the same as long as the culture remained the same.
I worked for an Intel spinoff whose CEO was a former high-level Intel exec from the 1990-2010 era. Internal goss attributed much of Intel's decision to stay out of the iPhone to him... there was a supposed quote that went something like "we make chips for computers, not g*d** telephones!"
As the tale went, he was sent out to this doomed-from-birth spinoff as a "sunset cruise" to basically force him into retirement (for this bad decision) without the bad publicity of a public head-chopping.
When I think back to that time period (serving tables, T9 texting in my apron on my Blackberry Pearl lol) I remember the touch screen being a tough learning curve for the majority of people.
The first iPhone was also gigantic, hideous, couldn't send pictures - something even a cheap $20 Samsung from the carrier could do - and it also didn't sell very well. People were more into "The Google phone", the Sidekiq, or the latest Razr. Think it wasn't til the 3GS came out with a ton of marketing push that it started to gain popularity, and it ended up having more to do with the App Store than the hardware - people did not like those touch screens for the first several years of smartphones. They came out at the height of texting and ringtone era, and we were pretty set in our ways, and it took years to change that behavior.
I think the App Store resonated a lot more with people back then rather than the iPhone as a device. MySpace was still around, the Bush-era recession had everyone looking for a side hustle. Most young/ambitious people I was around in "tech" (which was effectively HTML-based SEO and WordPress design) had a Blackberry and a side business. This kid I worked with became "rich" from an iPhone app that just combined other iPhone apps haha. Loved that time period. Graffitio!
Would have been very hard to predict the success of the iPhone, even as I was already entering orders for customers on a fully touch screen Aloha point-of-sale long before iPhone.
You’re right. The first iPhone was so bad that “the Google phone” was delayed by many months as they scrambled to completely redesigned their launch phone to be multitouch instead of keyboard.
The razr2 sold 5M units and the sidekick sold 3M to iPhone 1’s 6.1M.
The n95 did outsell the iPhone with 10M units but Nokia had a massively more mature sales pipeline whereas Apple had to build out carrier relations. It also shipped before the iPhone was even announced which gave it time to accumulate sales.
Everyone in the space though recognized how big it was because carriers were going out of their way to try to get it on their network (since at the time Apple was doing 1 carrier per country). Apple got lucky that AT&T bought Singular which made the iPhone accessible to many many more people.
3GS’s 37 million units was because Apple had 2 years to build up manufacturing capacity and carrier sales channels to match demand for what had become clearly a smartphone revolution.
The big things I remember from that era is that the iPhone was the first phone with an unlimited data plan which Apple/Jobs beat AT&T into submission to get. Until then you had to worry about every last byte you used on the dinky carrier-grade apps and the lousy WAP websites.
This worry removed, and the fact you actually had a real browser that could open real websites were the two main features that to me seemed like a huge leap forward.
Its also clear that the carrier wasn't ready for it. People with the original iPhone would get entire boxes mailed to them for their Cingular statement, itemizing every data transaction, but then all flat rate charged.
I had an original iPhone and did not get such statements. As I recall while Cingular was indeed not ready to handle unlimited data for customers, it wasn’t really a problem for the first iPhone since it wasn’t 3g. Once the 3g dropped , it was a problem since people were actually able to consume a large amount of data.
> The n95 did outsell the iPhone with 10M units but Nokia had a massively more mature sales pipeline whereas Apple had to build out carrier relations.
Am I remembering correctly that originally the iPhone only supported AT&T? My family all was on a shared Verizon plan at the time, and I have a vague recollection of the fact that it wasn't an option for us, but I'm not positive I remember correctly. Nowadays, the idea of a phone not being possible to purchase for a given network seems silly, but I feel like it was a thing at the time.
Which is partly why the Motorola(?) Droid phones got so popular.
Verizon couldn’t have the iPhone, so they pushed that as their equivalent with a huge marketing campaign. Always felt to me like that single-handedly pushed Android into the public consciousness.
Like without that maybe Android would be huge, but we updated have gotten the name recognition. Or at least not so fast, and instead would have been more of an implementation detail in most people’s minds.
Sprint tried to compete with the Palm Pre which was neat but had issues. Then Verizon got the Pre and Sprint’s last shot at relevance died.
Yeah it was only available on AT&T and you couldn't even send pictures (MMS). Hindsight is 20/20 - the people in this thread are overly glamorizing Apple and smartphones in general now because it's easy after something was already successful (the number of influencers on this post is vomit-inducing). In reality smartphones were a tough sell at first, people didn't like the touchscreen at first, it took a ton of marketing push to get people used to them that took years. I was 21 years old when iPhone came out and remember it perfectly clear - also just google sales data. iPhone was selling single digit millions in the first years, nowhere near the 100+ million Razrs sold, or the amount Nokia or RIM were selling.
"But they were new to the space!" "It was still a good start!" is peripheral
According to a quick search the 2006 Razr sold 50 million units (130 million total) but the first iPhone only sold 1.4 million when it released in 2007. iPhone was nowhere near Razr sales. Your comment is a bit disingenuous because that was the less popular Razr after flip phones were on the way out.
Nokia and Blackberry were selling a lot more than both brands at the time. Blackberry alone had 20%+ market share when the Pearl was released. Nokia sold the most phones by far.
You’re comparing unrelated things and completely discounting that Apple was a completely new entrant into the space vs entrenched players that had already established sales channels and carrier relations and were selling globally vs US-only to start for Apple.
Apple sold over 6M units of the first iPhone unless you’re saying 1.4M in the first quarter after launch since it launched in September. I was comparing it to phones released at a similar time and claiming that sidekick was somehow more successful is straight up laughable regardless of how you look at it.
The first iPhone defined what the smartphone category should be. Google took heed which saved Android. Nokia and blackberry did not and you can tell where they’re at now.
> Apple was a completely new entrant into the space vs entrenched players that had already established sales channels
So? If anything it supports the point that iPhone wasn't an immediate success. It wasn't as successful as the Razr flip phone was before it, not for a while. The original point was just that it would have been difficult to predict the success of iPhone even after it released, because it didn't do that well at first.
> In its first week, Apple had sold 270,000 iPhones domestically.[47] Apple sold the one millionth iPhone 74 days after the release.[48] Apple reported in January 2008 that four million were sold.[49] As of Q4 2007, strong iPhone sales put Apple no. 2 in U.S. smartphone vendors, behind Research In Motion and ahead of all Windows Mobile vendors.[50]
> As of October 2007, the iPhone was the fourth best-selling handset in the U.S., trailing the Motorola RAZR V3, the LG Chocolate, and the LG VX8300.[51]
I’d say being the #2 smartphone vendor on your first model and beating all Windows Mobile would be a fantastic first step and a clear indicator it would be extremely successful in addition to being #4 across all us handsets. 4M were sold in the first 6 months. You’re just simply misremembering how big it was and how well it sold.
The 3G version the next year sold 4x as many units (25M) . You could say it’s because 3G was such a huge upgrade our other software things like mms and App Store, but the first iPhone was in 6 countries while 3G was in 22 and got to 70. The 3GS did outdo the growth of that since it shipped 5M more units than would be explained just by being available in more countries (80 vs 70).
Could you predict it would end up dominating the smartphone market even as that market ate up more of the legacy feature phone market? Maybe that’s harder but the iPhone’s success wasn’t all that hard. The lack of any competition that could really keep up was another indicator. Android was a pretty big failure for a few years until enough of the feature set became parity and table stakes that people felt comfortable using it (or because Android was available in a lower price segment Apple wasn’t competing in).
It's not like Apple was some scrappy startup going up against giants, when their profits had been in the billions for years prior to the iPhone, which by the way followed the MacBook launch in 2006.
> strong iPhone sales put Apple ... behind Research In Motion
Are you aware that RIM is Blackberry? This is what I've been saying, iPhone was behind the others like Blackberry, Razr, Nokia, etc.
> As of October 2007, the iPhone was the fourth best-selling handset in the U.S., trailing the Motorola RAZR V3, the LG Chocolate, and the LG VX8300.
Yep. 1 million is a lot, but Razr was selling 10s of millions, Blackberry and Nokia were selling more than that. But yeah I guess iPhone had the super cheap carrier phones beat, but they weren't meant to be high end products.
> The 3G version the next year sold 4x as many
Yeah that's when it started to take over. Especially when the 3GS / $99 AT&T plan came out, everyone got it by then.
Predicting hits: What about bluetooth headsets? They were forcing them on us around the same time period we're talking about now... but only a few geeky dads and cheesy business guys used them, eventually they weren't really sold anywhere, comedians had been referencing them at this point. Having lived through that era I would have never predicted the success of Airpods. As I said in my above post it wasn't like we didn't have touchscreen devices. I don't recall being as receptive to the touchscreen as you do, seemed like most people outside the Apple cult initially hated it.
> It's not like Apple was some scrappy startup going up against giants, when their profits had been in the billions for years prior to the iPhone, which by the way followed the MacBook launch in 2006.
First I think you may be misremembering your Apple history. The iPhone was very much Apple’s first product release post their iPod success which rescued their company. While they weren’t a failing company that they were in 2001 (like near banrukpt failing) they were not by any means a behemoth. In 2006 they made 2B in profit on 10B of revenue. By comparison Nokia made $7B in profit. Looking at MacBook belies that you seem to not realize how insignificant those sales were to Apple’s revenue (and how that’s even more true today even though they’ve actually grown their market share in that segment).
> Are you aware that RIM is Blackberry? This is what I've been saying, iPhone was behind the others like Blackberry, Razr, Nokia, etc.
Except not. Razr isn’t a smartphone and iPhone outsold any smartphones that Nokia made. By 2007 when Apple shipped the iPhone RIM had been shipping the blackberry for about 8 years and had completely taken over the enterprise segment which until Apple cracked it was considered to be the only place that smartphones would be successful and that it would perennially remain Blackberrie’s to lose. To have a competitor who’s never done cellular or smartphones before take #2 from the get go is huge considering how unlike traditional consumer electronics that Apple had engaged in until then, the sales channel and regulatory environment looked completely different. Think about it - one huge innovation they did was that you could buy the cell phone directly from them and through the Apple Store and they took care of the carrier onboarding experience. No one else attempted (or even could attempt) to do that.
You’re simply misremembering or trying to paint a weird picture that the first iPhone was this niche device no one wanted. That’s literally not true. It’s inherently impossible to enter a mature market and become #1 overnight. That Apple came in at #2 is really astounding and everyone was paying attention to it and Google literally hit pause on their launch by a year to completely redesign their OS because they saw it as the future.
> Having lived through that era I would have never predicted the success of Airpods.
Well I worked at Apple before they launched AirPods and got to see an exec demo of them. From the first instant I knew they were going to be a hit. Did I know it was going to be a multi billion dollar business by itself? If I’d done the math on it I probably could have worked it out just from estimating an attach rate. I think you shouldn’t extrapolate your inability to predict hits to others and say no one saw things coming.
As for touch screens, we actually didn’t have capacitive touch screens. All the smartphones to date had been resistive and the introduction of multitouch that capacitive enabled as well as better scan rates made a huge difference. I think you’re outing your viewpoint when you’re discounting people who were enthusiastic about the iPhone as members of a cult even now without allowing for the possibility that maybe they see something you don’t. Same kind of reasoning happened with the iPod too and I made the same mistake thinking they wouldn’t be big and it was this weird Apple thing and the UX seemed weird until they fixed their strategy to open it up to Windows users. My excuse was that I was still a teenager so I didn’t have sufficient perspective. Btw not everything Apple touches is gold immediately. I think they’re going to struggle with Vision Pro. I think they did a bunch of novel interesting UX innovations but the “killer product” hasn’t been built in that space yet and Meta is a much savvier opponent than they have ever had to face to date in a new product line.
> MacBook belies that you seem to not realize how insignificant those sales were to Apple’s revenue
Unless we look at the actual data (i.e. Mac revenue was always bigger and was a actually growing at very fast pace unlike iPod by the time the iPhone came out)
I think you're making some key important reasoning mistakes. First, look at it as a percentage of annual revenue (numbers from ChatGPT so may be off somewhere):
2001 (ipod initial launch at end of year): 4.1B/5.36B, 76% Mac, <1% iPod
2002: 4.3B/5.74B 74% Mac, 2.5% iPod
2003: 4.9B/6.21B 79% Mac, 20% iPod
2004 (Windows support added late 2003): 5.3B/8.28B 64% Mac, 21.7% iPod
When I say it's "insignificant" I don't mean to say that Apple could have cancelled it and it wouldn't have mattered. Mac still remains a meaningful pillar of their product lineup even though it only contributes ~10% of revenues.
What you have to do is consider that Apple leadership views it as an ecosystem. Mac by itself isn't a lucrative or really important business. However, it's importance is that it makes sure that a customer in their ecosystem always has an Apple product they can buy when they need something. Importantly, if they have an iPhone they're more likely to buy a Mac and if they have a Mac they're more likely to buy an iPhone (& now Watch, AirPods etc). The refresh rates for these are also different enough that you're likely to remain stuck there by default once you get into the ecosystem because it's just an easier experience.
What I'm saying is that the strategic focus and resources was not really on Mac because Apple leadership did not see growth there by itself unless it was as an attachment to the iPod. You can see in the % numbers where iPod took over Mac as contributing a huge portion of % to their bottom line as soon as they made it generally available and that Mac sales themselves only started going up like crazy once iPod became generally available to everyone. Similarly, once the iPhone comes out we see it crazily cannibalizing iPod sales. At that point strategically the iPod barely got any attention. They didn't cancel it until 2022 because it was still bringing in significant revenue streams (+ a form factor Apple didn't have a replacement for until they got the Watch). Additionally, the overall laptop market has been shrinking even as Apple has been growing which is why their marketshare in laptops is so large even though it's comparatively such a small product for them.
So while the revenue from Mac was important from a "keep working on this" perspective & "ecosystem play", the vast majority of resources, focus, and energy were definitely thrown at iPod & then iPhone because of how much bigger the opportunity was and that even for Mac iPod and iPhone were the flywheel engines driving growth in those spaces.
If you're taking "insignificant" as the cancellation point for Mac, I think it would be that they succeed in their pitch that the Vision lineup is a Mac replacement. If they manage to succeed in that product line, Mac won't be much longer for this world.
He shows real data, you use ChatGPT, modify the timeline plus admit the numbers are off - yet you say he's making the mistakes?
High level: You're trying to make the case that iPhones were immediately more successful than the conventional market leaders like Razr and Blackberry when that's not the case by far - it wasn't true for several years.
When someone shows that's wrong with numbers (e.g. 130 million Razrs sold in 2 years vs iPhone's 6 million in 2 years) you say something like "yeah but they were new to the space!" But that's totally peripheral, and counter to your original claim.
You'll never convince those of us who were 18-24 years old when iPhone released what happened. You obviously don't have a clue, probably were a child or out of the country at the time because you're using ChatGPT to pull up (false) info we all know intuitively.
Other awful takes:
> Macbook sales were insignificant
False.
> Mac by itself isn't a lucrative or really important business.
Lol. Saying $10 billion a year is not lucrative is crazy. Saying that 30%+ market share on the laptop market is not important is crazy.
> Once the iPhone comes out we see it crazily cannibalizing iPod sales. At that point strategically the iPod barely got any attention.
Nobody ever compared iPhone to iPod - we were talking about feature phones of the day like Razr, Blackberry, Nokia, etc.
To be fair using only Q4 figures was a mistake, since iPod sales were always the highest in Q1 because of the holiday season (not as noticeable for Macs).
> ChatGPT to pull up (false) info we all know intuitively.
I summed some of those years from Apple's Quarterly reports (annoyingly they didn't seem to report by segment FY sales...) and they are more or less similar:
2006 :
Mac : $7,375 (49.01%)
iPod+iPhone : $7,676 (50.99%)
2007 :
Mac : $10,314 (55.02%)
iPod+iPhone : $8,428 (44.98%)
2008 :
Mac : $14,276 (56.48%)
iPod+iPhone : $10,997 (43.52%)
2009 :
Mac : $13,824 (43.93%)
iPod+iPhone : $17,657 (56.07%)
I don’t think identity is relevant but since you’ve made it an issue, I was in fact an intern at Apple working on the first iPhone when it launched and continued working on mobile phones for a long time after (eg worked fully time on WebOS with a bunch of iPhone veterans since a large contingent of them started it). You may want to be careful about the blind assumptions you’re making and degrading into ad hominem attacks is beneath the standards for this site.
As for the ChatGPT dig, for what it’s worth I spot checked various numbers that they were consistent with other sources and Apple’s official Q4 numbers. If you can point out specific issues I’d be happy to correct. I called it out simply in case someone wanted to triple check the numbers. But again, please refrain from baseless attacks and point out actual errors in the facts presented if any.
I pointed out that Apple on initial launch was the #2 provider outselling ALL windows mobile manufacturers including Nokia. They were widely recognized as completely reinventing the smartphone market even at the time which you can tell because Google had an “oh shit” moment with Android to competent rethink the OS to build it around multitouch. I don’t know what else to tell you. This is based on reporting and direct anecdotal conversations I have had with Google and Apple coworkers that related that history to me contemporaneously.
The successful Razr version was released a year before and Motorola was a very mature cell phone company that basically introduced phones worldwide right away similar to how Apple does phones today and was not a smartphone. It’s also important to remember that was actually the first “Apple” phone since it was integrated into the iTunes experience (ie if your wanted iPod + cell phone). So if anything, a feature phone at the same price point as Apple a year prior selling like hotcakes only proves that it was clear iPhone was a big deal.
> Lol. Saying $10 billion a year is not lucrative is crazy
It is crazy but that’s less than 3% of 2023 revenue (in 2023 it’s still about 10% at 30B but down 27% from 2022).
It’s a strategic product to build the Apple ecosystem but tactically it’s not where they make their money and sales and focus is. That’s why you see them still making Apple TV’s for a fraction of Mac revenue (watch + AirPods + tv + HomePod is $9B and the majority there is going to be watch and AirPods).
Also if you actually follow the space you’d know the reason that Apple has a significant portion of the laptop market is because the market itself has stagnated and shrunk because smartphones and tablets have eaten it. In the same time period since 2007 that Mac revenue have taken to double Apple's overall revenues have 10x. I gave context from before in 2001 to show that Mac sales were stagnating and not at all a way that Apple would survive and once they knew how big iPod was they knew their future was not Mac. This by the way is straight from the horses mouth - Steve Jobs was one of presenters for interns that year.
As for the strategic hypotheses, keep saying it’s conjecture all you want but please be aware I’ve had conversations with people who were within the company including some senior leaders. So while it may be wrong I suspect my conjectures may have a slightly larger chance of being correct than someone who remembers the iPhone as some “also ran” phone that no one could predict was going to be that big and forgetting all the lines at stores even it launched and so the constant non stop press it had for years even post launch.
I’ll reiterate - if you have issues with my facts or conjecture, please actually point out specifically which facts are wrong or provide news articles or analysis contradicting what I’ve stated. Your recollection of how big a moment iPhone was in popular perception and in the tech industry is wrong or you weren’t paying proper attention or were in the wrong community that was on the periphery of everything happening.
> I was in fact an intern at Apple working on the first iPhone when it launched
> I’ve had conversations with people who were within the company including some senior leaders
There we go, why didn't you just say that in a disclaimer up front? At one point I cursed the Apple influencers and was mainly referring to you :D
You had a very different experience than the mainstream since you worked at Apple when it launched.
> This by the way is straight from the horses mouth - Steve Jobs was one of presenters for interns that year.
Sounds like you were doing keg stands in the Apple Koolaid while most of us were still pirating Windows Vista off LimeWire and changing discs at red lights! You haven't lived unless you had a 6-disc changer (in your trunk for some reason).
Yeah picking Q4 in my previous comment wasn't fair (Apple didn't seem to release FY revenue by segment which is a bit annoying and iPod sales were generally much higher in Q1
No argument about what happened after the iPhone (specifically 3G + App Store) came out, but I'm not sure I fully agree with:
> What I'm saying is that the strategic focus and resources was not really on Mac because Apple leadership did not see growth there by itself unless it was as an attachment to the iPod.
By 2007 iPod's market share was ~72% in the US. The MP3 player market was pretty saturated and there was very little growth left (especially with increasing competition from (feature)phones). On the other hand Apple only had < 5% of the PC market (in the US) by 2006 so there was a lot of space to grow especially in the laptop market if if they started released more competitive products (by ditching PowerPC).
If we look at iPod + iPhone revenue around those years
2007 :
Mac: $10,314 (42.94%)
iPod+iPhone : $8,428 (35.09%)
2008 :
Mac: $14,276 (43.92%)
iPod+iPhone: $10,997 (33.82%)
Mac sales were actually growing faster even if we combine iPhone and iPod sales (which probably meant that a lot of people switched to other phones/mp3 players instead of buying an iPhone at least initially)
I think that's mainly related to the the PowerPC to Intel transition. It's not clear if the iPod really had a huge impact on Mac sales since Mac's market share started growing much faster when iPod had already peaked. Then after iPhone sales started accelerating Mac sales growth rates began declining which would imply that handheld and PC segments aren't necessarily related that much.
If Apple hadn't released the iPhone, Mac probably would have done just fine on its own and iPod sales would have remained stagnant or declined significantly (e.g. worldwide they weren't doing that well compared to Sony Ericsson's phone sales in 2006-2007, who IIRC leaned heavily into MP3/media in those in those years). It was pretty obvious that phones/smartphones were the future regardless of what Apple did (the transition would have just been quite a bit slower without them).
Of course (compared to you) I really have no clue what the internal sentiment inside Apple was a at the time so I'm just commenting on the market as a whole.
My point about iPod sales was that Mac was fairly stagnant before and after in gross revenue. Once iPods were made compatible with windows, you see Mac sales start to grow again. The strategic story was that iPod was your gateway drug into the Apple ecosystem - whether they knew it would be that way I don’t know. I suspect it took them by surprise and they weren’t sure at first if Windows support was needed or growth would continue on its own.
As for iPod saturation, I don’t know if that’s actually true and I’m too lazy to look up the numbers as to when it happened. I’ll point out two things area important when thinking about things - you have market share and market size. You don’t have saturation until you have stopped growing. Owning a constant 70% of a market that’s growing consistently each year is not saturation - was the portable music market stagnant by 2007? Maybe. But you can’t tell that just from market share. According to ChatGPT growth started slowing down in 2008 but that’s already post Razr and iPhone when it became an obvious calculus of do I want and old tech iPod or a general purpose computer and cell phone in my pocket. Nanos and shuffles kept selling well because the cell phones didn’t have an appropriate answer for a very very long time (too much growth elsewhere to bother with that use case).
The transition to Intel was in 2006. I’m skeptical that’s a motivating reason for a lot of switchers and the numbers show more growth correlation with iPod windows support and iPhone which makes sense for the attachment theory whereas I don’t see in the numbers that making a big dent. It’s important to remember that consumers don’t make decisions on what CPU is in a machine; even technical people wouldn’t make that decision since even in the tech community today it’s framed as windows vs Linux vs Mac and not Intel vs AMD unless you are building a PC from parts (and Apple isn’t in that segment).
I’m not sure why you say iPod has peaked at the time of Windows transition which was in 2004. 2007 which is when growth had started slowing is when the iPhone kept up the growth. I agree that phones being the future was going to be obvious and the Razr was likely their first dip of a toe to estimate how big the market for an iPhone would be since they had a deal with Motorola for iTunes support.
As for Apple’s computer market share, the reason it’s so high is that the overall market is stagnant but Apple is managing to eke out growth here and there. Same as with smartphones where Apple has 30% of market share but 98% of the profit; they are much more streamlined than their competitors. Expect to see their market share grow one cell phones stagnate although the story there is more complicated since they play in a wider range of economic households whereas Mac products are (as they’ve always been) in more higher end segments (since the lower end would be dominated by chromebooks or no laptop). I see no indication of Mac growth stopping pre or post iPhone - it only started more recently which makes sense it would take so long because Apple is not immune to the reality in that space even though they’ve defied it for so long (and as for many companies COVID spiked sales since kids needed to do school remotely so the recent stagnation could just have been a temporary anomaly and reversion to pre pandemic numbers).
It’s genuinely hard to say what would have happened if Apple had not released the iPhone. Certainly Apple had stabilized as a company by 2001. But Mac sales had stagnated in the years prior to iPod and without iPhone as another engine it’s unclear what would have happened to Mac sales after that especially as the overall laptop and computer segments started collapsing (but this happened much much later after the smartphone revolution). Their music business may have helped a bit but a huge part of growth there itself was due to iPhone as well. These are reinforcing effects that are really hard to tease out. It’s likely it would have kept going since it was financially more stable but it would likely be at least a 10x smaller company.
Thank you for engaging factually and thoughtfully with the analysis.
> Owning a constant 70% of a market that’s growing consistently each year is not saturation - was the portable music market stagnant by 2007?
iPod sales grew by 18% in 2006 and 17% in 2007. It was 140% 2006 and 373% in 2005. So yeah they weren't technically really stagnant just slowed down significantly. Even if we look at combined iPod and iPhone sales they grew slower than Nokia and Sony phone in the same period (Motorola had peaked in 2006). That didn't change until the 3G came out in 2008 and "high-end feature phone" market collapsed by 2009.
> It’s important to remember that consumers don’t make decisions on what CPU is in a machine
Yes but IIRC G5 had pretty awful performance per watt and Apple never put it into any laptops. They were stuck with G4 which wasn't really competitive with x86 by 2006.
> 2007 which is when growth had started slowing is when the iPhone kept up the growth.
It didn't initially though, not until mid 2008 if we compare to how fast Mac sales grew in the same period. Between 2006 and 2009 Apple's laptop sales increased by almost 3x or so. While even if we add up iPod + iPhone sales they "only" grew by 2x. Especially 2007 to 2008 was relatively pretty bad since iPod + iPhone sales only went up by 1.3x. Macbooks were the fastest growing product/segment between mid 2006 and mid 2008.
To be fair I'm mostly nitpicking at this point since I do agree with your longterm analysis more or less, but since Mac sales grew at the fastest during the period when iPod sales were relatively stagnant and iPhone sales were still relatively very low (2007 to mid 2008 before the 3G, the original iPhone wasn't a particularly good smartphone it had a large multitouch screen and that's about it..) it's not that obvious to me that iPod/iPhone sales were driving Mac sales that much.
Of course that specific period was pretty unique. Laptop market was growing very fast and Apple finally was offering devices which were incredibly competitive with other laptops at the time. It doesn't change the big picture too much (most growth was coming from iPod sales before that and iPhone/iPad afterwards)
To be honest, I think you're badly misremembering that era. People were calling the iPhone "the Jesus Phone" after the original keynote announcement, the lines on launch day were around the block, and upon release, there were definitely tons of flame wars around physical vs. touchscreen keyboards but there was a widespread consensus that the iPhone's predictive typing correction was pretty good and that the touchscreen was miles ahead of any similar-equipped phone (many of which were still resistive, ugh!).
It definitely didn't get mainstream popularity until the 3GS/4 and the App Store, but people were definitely interested from day 1. Don't forget that early builds of Android looked much more like a Blackberry clone until the iPhone was announced, and then Google immediately scrapped everything and rewrote it from the ground up to be iPhone-like.
It just proves that no matter what you make and how innovative a product it is someone will come along a decade later and claim it was nothing but marketing fluff.
Gruber said it best (to paraphrase): Apple does things that are derided at launch, and then eventually becomes so commonplace that people think it was obvious.
The iPhone is that. I used to deride it at launch when I had my Sony P1, but it was truly a revolution. Anyone denying its success looking back,even as a v1, is living in a bubble.
> I remember the touch screen being a tough learning curve for the majority of people. people did not like those touch screens for the first several years of smartphones. They came out at the height of texting and ringtone era, and we were pretty set in our ways, and it took years to change that behavior.
Touch is probably the single most intuitive and easy to use interface ever created for computing. It is so obvious even a 5 year old child understands it without being taught (as both my kids did). Very very very few people found touch to be a significant learning curve at all so I'm not sure where that idea comes from.
There was definitely a whisper campaign from the tech talking heads that people wanted keyboards and touch screens were not the future... but that was mostly from people who never used it or competitors who had nothing to compete with.
> The first iPhone was also gigantic, hideous, couldn't send pictures - something even a cheap $20 Samsung from the carrier could do
It wasn't much larger than competing "smart" phones at the same and the large size was in fact a huge selling point: a bigger screen to see more content in apps and on websites.
MMS support was missing for sure but was also rolled out as a software update to all existing customers for free. The first time AFAIK that ever happened in the cell phone game. Prior to that (and still in Android land) updates require carrier cooperation and manufacturers did not hand out free features - buy a new phone for that.
> and it also didn't sell very well. People were more into "The Google phone", the Sidekiq, or the latest Razr.
I would say it sold quite well and exceeded expectations. In the iPhone announcement Apple said they'd like to sell 10 million of them by 2008 and sold 13 million. Sales roughly doubled the next year (2009). And the next (2010). And the next (2011). And the next (2012).
> I think the App Store resonated a lot more with people back then rather than the iPhone as a device.
I don't agree it resonated more than the device at that time but it was certainly an extremely important milestone. Apps, especially games, definitely drove a lot of adoption.
> It definitely didn't get mainstream popularity until the 3GS/4 and the App Store
Yeah that's all I was saying. I've used iPhone exclusively for 15 years and am not anti-Apple, but people cannot handle nuance in online forums, so they they come out swinging if you share any experience that doesn't 1:1 reflect the brand marketing of the company.
Second reason it didn't take off faster was that iPhone was typically a carrier exclusive, and in most markets, the iPhone carrier was typically one of the smaller carriers. So iPhone wasn't available to most mobile phone users in a given market, unless they went to the trouble of switching carriers.
If you were around when the first decent iPhone released (2008) you'd remember that everyone had one for $99 on AT&T, where non smartphones were still like ~$300, so I'd say you have it backwards.
Maybe you weren't old enough, or are from another country. Everybody remembers this, it was a great idea on their part as it got everyone using iPhones.
> I think the App Store resonated a lot more with people back then rather than the iPhone as a device
You are forgetting, there was no App Store when the iPhone launched. Apple was originally against the idea of Apps. The App Store launched a year later, with the iPhone3G. Yet the iPhone was wildly popular not just from the day it launched, but from the day Apple first demoed it.
I think what caught people's attention with the iPhone is that it's one of the first phones where you could easily browse websites from your phone in a way that didn't feel like a gimmick.
Other phones had web browsers, but they only really worked on special mobile versions of websites. They were also slow and painful to use even on those mobile optimised websites.
Then iPhone came along, and Apple had someone managed to squash a full desktop web browser on it. It did a half decent job of reformatting desktop-only websites to fit on the screen. When pages didn't reformat, the new touched-based panning and pinch-to-zoom gestures allowed you to still experience them with ease.
And Apple managed to make the whole OS feel responsive, despite using the exact same hardware as their competitors.
> Think it wasn't til the 3GS came out with a ton of marketing push that it started to gain popularity, and it ended up having more to do with the App Store than the hardware - people did not like those touch screens for the first several years of smartphones. They came out at the height of texting and ringtone era, and we were pretty set in our ways, and it took years to change that behavior.
This was not true per my memory. Literally everyone I knew in their 20s and 30s in NYC was switching to the iPhone 3G as of summer 2008. You had to wait in line to buy it for months.
Unlimited 3G + GPS + touchscreen browser was what made it explode. Broadband internet, in your pocket, with mapping capabilities. It felt like the possibilities were limitless, with new apps and functionality being discovered and released daily.
Yea it definitely felt like at the time Intel was in a tough spot.. while the article is stating that the narrative about the margins being narrow for arm chips so Intel was nervous about the area, one thing I can attest to is that even if that narrative was false when it comes to Apple, competitors of Apple at the time definitely would be assuming that if Intel went into that space that they gave Apple a good price, so just the perception of them selling a good chip to Apple could have hurt Intel's fat profit margins. Like Apple was selling phones for the same price Intel was selling chips for -- so maybe the higher cost could be justified by Apple who knows, but the perception of Intel's profit margin they are willing to live with impacts their negotiations with other customers dramatically as well.
The point here is that there is tons of money to be made in manufacturing those chips that Intel lost out on by ignoring mobile. That “Apple makes their own chips” does not alone mean Intel could not have profited from this — as indeed TSMC, ASML, and ARM are.
This analysis misses kinda a major point. The nice thing about making mobile SOCs is that the yields are more forgiving. If you have 1000mm^2 of silicon that you're slicing into 10mm^2 dies, each defect (of which there will be many on early leading nodes), will only cost you a 10mm^2 chip, instead of a 50mm^2 chip. And because you're making them in volume, you get many many cycles to improve your process before you try to make bigger chips with it, ie: CPUs/GPUs. And because Apple wanted the increased performance/battery life, they reserved capacity from TSMC on these leading nodes in advance, helping to finance their development while providing a garunteed customer that was going to buy in volume. This gave TSMC a huuuge advantage over Intel that materialzied around ~2018.
That is actually a good point - the fab process would turn out to become another weak point (besides the missing moat of ARM) of Intel. There is no way Apple would watch TSMCs leadership year after year and still stick with Intel fabs.
Apple hates being beholden to one company. It’s bitten them many times in the past.
I suspect if anyone else could keep up with TSMC Apple would still dual source.
But between their lead and the benefits of being such a big customer they get first crack at the cutting edge stuff, single sourcing manufacturing probably makes the most sense.
And their interests are aligned, unlike their dependencies on MS/Adobe/Motorola/IBM/Intel.
Well volume is an issue. Even a low margin part which has very high volume sales can help you afford to build leading edge Fabs, and keep process technology leadership.
Apple can only do that now, because of the billions they have made on the iPhone, plain and simple.
And - more importantly - they were well geared to do that, since the beginning of computing.
There being no money in SoC's, is because they're all being made across the other side of the planet, mostly, from the intended final users.
If Intel were really 'leading edge', they'd have made desk-side custom fabrication a thing in the makerspace already. Such that I can, as a computer user, print 10 or 20 or X little chips, for my own specific purposes, non-mass-market.
This would be a truly revolutionary adventure from a 'grandfather of computing' style company.
Alas, the x86 is, indeed, everywhere. Grandfather Intel has a massive garden.
If only the SoC battles were truly localized, and a real computing revolution can happen (before its too late).
You should have a locally-built device in your hand.
The mid to late xscale era got very weird. Between the 90s and early 2000s handheld processors were growing in leaps and bounds. At the height in 2004 devices like the Dell x50v were shipping with 624mhz xscale chips with a dedicated GPU with 16MB of VRAM. Then they just stumbled. Later devices dropped the maximum clock speed, dropped the dGPU, even dropped the screen resolution from 640x480 to 320x240.
I had a Dell Axim (not sure of the spec), I'm pretty sure Dell gave it away for buying a couple Dell branded printers or something like that. I also had an HP iPaq which was pretty similar (I also think I got Linux running on that one somehow).
It could do a few fairly impressive things, like running emulators as you mentioned. But I think the problem with those was Windows Mobile or Windows CE or whatever they called it at the time. The touchscreens stunk as well.
It was just a crappy scaled-down version of Windows. It was missing the ability to run actual Windows software. It had a browser and a serviceable camera (it helped fulfill my eBay addiction at the time), but it wasn't the same as browsing on a PC.
It probably still wouldn't have been ideal, but within another 2-3 generations it would have been improved/faster and then 'good enough', just like the early iPhones.
I also had an ipaq ~2003. It didn't have enough storage to be a reasonable music or movie player for commutes and (mine anyways) only had wifi via a honking PCMCIA adapter that drained the battery in no time, so I otherwise browsed the web with a laptop. No websites were anywhere near designed for small screens in those days, either.
You're right that the OS was garbage, further limiting the already limited hardware. I think I also got linux or BSD running and messed around with some WEP cracking in my neighbourhood for a bit, but then it otherwise sat in a drawer.
I was still in school and it was a stupid and expensive purchase, but it did teach me to only get new tech if it was actually useful and otherwise wait, which as served me well since, including the iphone (which the first one was barely adequate for what it promised).
You didn't just get a storage card? Between an SD card and a CF microdrive I kept a ton of media on my pocket PC. Most of the ones that came out in 2003 and onwards had bluetooth and wifi built in.
Wait! I had the x51v! That’s probably why I loved it so much. With the two batteries and stand to charge them both. (Or was it three?) I can understand the desire to get one for nostalgia.
For some reason my strongest memory is using it in the dentists office.
My previous device had been a Sony Clie peg-tg50/u (which in some ways was great, but lacking built in WiFi… however I used to save web pages on my laptop and put them on it to read later). But that once fell out of my pocket on a lawn tractor, went through the blades, came out with some nicks but was otherwise fine.
I have fond memories of worms and an rts on that. (The stylus was both great and horrible for that ).
In memory what really was just amazing to me at the time: great fast mp3 player(better on the Sony)
The ability to play videos.
On the dell, the web browser probably wasn’t great, but in my memory I still remembering thinking it was the bees knees. My laptop at the time was a Toshiba Satellite with a pentium 4, 512mbs of ram, and a 16mb GeForce card. Which to me, was pretty darn amazing. (Except for its tendency to every 6-8 months become unable to boot suddenly, needing windows to be reinstalled from Toshibas 4(?) re install discs on an increasingly broken disc drive. This of course was partially more frustrating due to my limited computer skills at that time… which were more comfortable overclocking AMD K6-2s with jumper settings)
Yeah those NAV buttons drove me nuts. Such a wart on an otherwise great upgrade. Wm5 had one handed navigation and you didn't have to worry about a dead battery wiping your applications.
> Apple had to create a 32-bit version of the OSX operating system for Intel’s x86 architecture before quickly phasing it out because Intel was late releasing its 64-bit Core 2 architecture designs.
I've read before that internally, OSX always had a working x86 port, to ensure the OS is actually portable should the need for a switch arise. Like it did in the past with older macos versions. So in that case they even got lucky because it was the very architecture they switched to.
Apples original iPhones were MVP. The real juice is when they bought that company and designed a 64bit ARM chip out of nowhere and found themselves 5 years ahead of the competition
Intel hired too many MBAs. When will companies realize hiring people with nothing but MBAs (because they have no hard skills) is a recipe for long-term failure?
Andy Grove flew in Clayton Christensen to let him talk for about 15 seconds before deciding that Intel would disrupt themselves by taking huge losses on Celeron. But Celeron did not save Intel; ASCII Red and multicore saved Intel. If he had actually read Clayton’s book, he would have understood that. Otellini got the disruption theory correct, and stayed out of mobile. But was that right? Maybe not in the current monetary environment where investment flows dwarf operating flows. A big mobile market could attract more investment than the losses it would generate. So disruption theory now works in reverse, and I’m not sure how far that implication goes.
Intel's missed opportunity with the iPhone during the XScale era mirrors how players without Traffic Rider Mod APK might miss out on game advantages. Just as Intel lost a critical market, gamers without the mod miss out on unlocked features and enhancements, potentially limiting their gaming experience and competitive edge. https://trafficrider.racing/traffic-rider-apk-for-pc/
Another perspective of the same event. Had to read 1/2 through OP article to get at their argument - Otelli was innovative, but the deal made no sense for Intel.
I found this article broader and more thought provoking.
IIRC, the iwmmxt instructions used similar encodings to some of arms vfp extensions, threatening to bifurcate the arm ecosystem (this is alluded to in the article).
I don't like how this whole article is framed as how obvious it was that Intel made a huge mistake. Hindsight is 20/20, there was no such data available.
It was not predictable that the iPhone would be a success, especially not to a degree of Intel sacrificing every profit calculation in mere "hope" of huge volume later.
The numbers were there for the iPod. Intel could have just pitched to become the SoC-supplier for the iPod and didn't do it. They surely crunched the numbers several times and it didn't work out.
The first iPhone was then built on the iPod platform with an Infineon modem, so the better question to ask is probably: Why wasn't Intel interested to supply the CPU for the iPod?