????For Otellini, getting it right in wireless isn't just about diversifying revenue or driving the company into growing markets (though that's part of it). Otellini's mobile gambit is about redemption. Since becoming CEO in 2005, Otellini has stubbornly insisted that Intel could develop its own chips based on x86, the company's historic microprocessor design standard, instead of licensing technology from the British company ARM Holdings, as most of his competitors have. So far his bet hasn't paid off. The company proclaimed that its Moorestown system-on-a-chip would be in smartphones in early 2011, but instead it is mostly used in robotics and netbooks.
????Ironically, Intel used to manufacture ARM processors for early smartphones and PDAs like the Palm Treo. But in 2006, Otellini sold its entire mobile product line, called XScale, to Marvell Technology Group for $600 million, essentially cutting off its access to mobile devices. And that wasn't Intel's only questionable move in mobile. In 2010, Otellini decided to partner with Nokia to develop MeeGo, a Linux-based operating system. A year later Nokia (NOK) ditched the project and opted to adopt Microsoft's (MSFT) Windows Phone instead. Intel changed course and in September picked a new partner: Google (GOOG). Intel software developers worked to make sure that Android could run on the company's chips without a glitch.
????Pairing up with the world's fastest-growing operating system is a smart move for Otellini (who has been on Google's board since 2004). But there's little question Intel has a lot of catching up to do. "The perception is that they've overpromised and underdelivered," says Raj Seth, an analyst with Cowen Group.
????Meanwhile the rest of the industry has moved ahead. Processors designed using ARM Holdings' technology now power 90% of smartphones. Qualcomm (QCOM) leads the pack with 51% market share (see chart below).
????Otellini insists the MeeGo debacle put Intel behind schedule by just two months. And when it comes to chip-manufacturing technology, he contends that Intel is about three years ahead of the competition.
????Intel's nine semiconductor factories churn out a collective 10 billion transistors per second. Its latest and greatest fabrication plant, called D1X, is in Hillsboro, Ore., about 20 miles west of Portland. D1X is one of the biggest construction projects in Oregon's history. When the state-of-the-art facility opens next year, it will be the first 14-nanometer factory in the world. And it will have cost Intel upwards of $5 billion.
????Keeping up with Moore's law, which states that the number of transistors incorporated in a chip will approximately double every 24 months, is an expensive business that requires Intel to constantly invest in new manufacturing technologies and build new plants. But beyond the PC, it's not clear how much that manufacturing lead is helping. The biggest facilities making ARM-designed processors today are based on a less advanced process than the one Intel uses to make its Medfield chip, for example, yet that hasn't stopped the competition from eating Intel's lunch. "Intel has tried to bring the same tools that have made it successful in the past to mobile, and it's not working," says Piper Jaffray analyst Gus Richard.