(2020-11-15) Allworth Intels Disruption Is Now Complete

James Allworth: Intel's Disruption is Now Complete. Clayton Christensen shared with Andy Grove his research on how steel minimills, starting at the low end of the market, had gained a foothold and used that to expand the addressable market, continued to move upmarket, and finally disrupted the giant incumbents like US Steel. Grove immediately groked it.

Grove used the learnings of Christensen’s research to guide Intel over his tenure. One of the most famous examples of this was Grove pushing Intel to do something that companies rarely have the appetite to do: launch a low-margin product that cannibalized its high end products. But Intel did it — they introduced the Celeron processor in 1998. It did cannibalize their Pentium processor to an extent, but it also enabled them capture 35% of the market they were competing in. Perhaps more importantly still though, it staved off threats from the low end.

It was not until 2005 that Grove retired from Intel. That happened to be the same year that Paul Otellini took over as CEO

Apple converted. Steve Jobs invited Otellini on stage at Macworld to make the announcement

when Apple were figuring out how to power it — and by it, I’m talking about the iPhone — they came to their new partner, Intel, for first right of refusal to design the chips to do.

We ended up not winning it or passing on it, depending on how you want to view it.

Ben Thompson at Stratechery, characterized it like this: Intel’s fall from king of the industry to observer of its fate was already in motion by 2005: despite the fact Intel had an ARM license for its XScale business, the company refused to focus on power efficiency and preferred to dictate designs to customers like Apple, contemplating their new iPhone, instead of trying to accommodate them (like TSMC).

it saw no need to question its winning formula: that of integration of chip design and manufacturing

Yesterday, Apple announced the first Macs that will run on silicon that they themselves designed. No longer will Intel be inside.

Apple’s initial foray into chips didn’t produce anything that special in terms of silicon. But it didn’t need to — people were happy to just have a computer that they could keep in their pocket. Apple has gone on to sell a lot of iPhones, and all those sales have funded a lot of R&D. The silicon inside them has kept improving, and improving, and improving.

Finally, today marks the day where, for Intel, those two lines on the graph intersect. Unlike the last time the two lines intersected in the personal computer market, Intel is not the one doing the disrupting. And now, it’s just a matter of time before the performance of ARM-based chips continues its march upmarket into Intel’s last refuge: the server business.