The CPU that Intel built just for Apple

  • Analyst Opinion – A little over two years ago, a verbal Intel beating was a standard part of every Steve Jobs Macworld keynote. Today, Apple owes a lot of its PC success to Intel and its heritage as a custom chip maker. Earlier this month, Jobs proudly announced that Intel developed a CPU just for him. True? Or is he exaggerating? Is this yet another example of Jobs’ reality distortion field? Let’s have a look.
    You may have wondered how it is possible that the MacBook Air is getting a new Intel microprocessor - a processor that is so new that it has not been available for any other product. We actually have seen other examples of Apple being treated as a very special customer by Intel, such as the exclusive availability of the 3.0 GHz quad-core Xeon last year. A little investigation reveals that Intel actually did develop a processor for Apple and its MacBook Air. And, if you are aware of the background story, this special Apple chip makes a whole lot of sense for both Apple and Intel.

    On the face, of it, it might be hard to picture Intel as a custom supplier, but, believe it or not, that’s where the company got its start almost 40 years ago (Intel celebrates its 40th birthday this month).

    Intel has a long and varied history in the areas of the transistor, MSI (medium-scale integration), and LSI (large-scale integration) designs. This business has led the company to the memory business and back out again (and back in and back out again: If you look all the way back,  Intel's first money making product was the 3101 Schottky bipolar 64-bit static random access memory SRAM chip). As a matter of fact, the company was in the process of exiting the memory business when the company was looking for other things to do with their novel and, at the time, controversial PMOS design that it used in the 4004 microprocessor, which was released in 1971.

    This 4004 CPU was initially designed just for a company called Busicom, Japan-based manufacturer of calculators. But Busicom went broke in 1974 and the 4004 became commercially labeled. There you have it: What is generally considered to have been the world’s first microprocessor really was a programmable 4-bit microcontroller that was tailored to a customer’s specific needs.

    But there’s also a custom element to the 8008, a microprocessor that was introduced by Intel in 1972: Luck always plays a factor in the success of any great company and Intel’s lucky break came when an up and coming company in San Antonio called  Datapoint Corporation, originally known as Computer Terminal Corporation (CTC) was developing a highly integrated microcontroller in the early 1970s. The pioneering CTC was replacing the electromechanical communications terminals and minicomputer console called ASR 33 teletypes with a CRT-based all electronic stored program system, the Datapoint 2200 – at the time they called it a glass teletype. Datapoint developed the specifications for the first 8-bit microprocessor. And yes, you guessed it, Intel built for them what later became the Intel 8008.

    With these events, as well as the coincidental development of the micro-computer, Intel was provided with a path that eventually enabled it to grow to the giant company it is. In recent years Intel has not really been known as a company that listens to its customers particularly well, but this heritage plays a role in the market today and certainly has allowed Apple to get its hands on this powerful, small and low-power multi-core CPU for the Air laptop.

    When Steve Jobs asked his new best friend Paul Otellini if Intel could produce a super small yet powerful CPU for this notebook, Otellini apparently did not hesitate. If you look into the development Intel went through in the past two years, it becomes somewhat clear that Otellini has changed Intel into a much more customer-centric company again. Although he isn’t part of Intel’s founding team, he knew listening to customers and telling them a simple “we can do it” was what had made the company great in the first place.

    Intel and Apple also benefited from another bit of luck - Intel’s design lab in Israel. The Haifa team around Mooly Eden was busy trying to beat Transmeta in the super low power yet plenty powerful CPU game in the early years of this decade (and of course, they were trying to go after AMD’s technology advantage in 2005 and parts of 2006). They did it with the Banias chip, but Intel’s management at the time was not too receptive, mostly because the chip concept did not play along the Gigahertz mantra of the time.  

    However, the Haifa gang was persistent and luckily, for Intel, they won the day. While the folks in Oregon were designing what was described as a nuclear power plant in a box in the early 2000s, Mooly Eden’s project went for the no-coulombs in a chip. They succeeded with the Pentium M (Banias core), which eventually ended up in the Core 2 Duo and a whole family of low-power powerful CPUs. The combination of competitive pressure from AMD, Haifa’s persistence, and a change in top management at Intel put all the pieces in place for Apple to win over Intel as a chip partner.

    Of course, you may say that AMD never had a different approach than just that. And if there is one company that has been known for listening to its customers, then it surely has been AMD. But from a perspective of resources, Intel plays in a different league and that provides additional opportunities.

    What Apple ended up receiving for the MacBook Air is a custom-built Core 2 Duo 9000 series, multi-core, multi-gigahertz, sub-25 watt chip in very compact package. And Apple got it exclusively until this fall: Later this year, Intel will make the CPU commercially available for other OEMs. It doesn’t take much imagination to see that other OEMs will probably come out with Air-like machines in a year and half, and - by then - Apple will have launched its next new trick. No doubt, Steve will call on his buddy Paul to help him out again.

    It will be interesting to see how well Intel will play the custom chip maker game down the road and if Apple will remain the only company to get its hands on such a chip exclusively for some time.

    In the meantime, I need to find out what line to spend the night in so I can get an Air.

    Dr. Jon Peddie is the founder of the leading multimedia market research firm Jon Peddie Research