The technology behind Centrino, now a $5 billion business for Intel, was born in an R&D lab in Israel.
By Adam Lashinsky

(FORTUNE Magazine) – It is whispered around the halls of Intel headquarters in Santa Clara, Calif., that the old spirit of the company is alive and well--on the other side of the world, in Haifa, Israel. That storied Intel corporate culture favored rigorous debate and respectful confrontation more than phony politeness or backstabbing. In Israel, where Intel has employed engineers for more than 30 years, the willingness to push back delivered Intel one of its greatest recent successes, the Centrino brand of wireless technologies. "We have a strong culture of debate and confrontation here," says Dadi Perlmutter, an Intel vice president and leader of the Israeli chip designers. "Sometimes too much."

The tale of how Intel developed Centrino--a collection of wireless components that Intel made synonymous with Wi-Fi broadband access--is one that couldn't have happened at the home office because it involved challenging orthodoxy. In the late 1990s, when Intel was developing the Pentium 4, the most important attribute of a new chip was processor speed, or frequency, measured in gigahertz. But fast chips consumed more power, which meant shorter battery life--perhaps the most critical feature for Wi-Fi-enabled notebook computers. "At the time," says Perlmutter, "frequency was God. That was what sold. You could argue many things, but not frequency."

That is, until Simcha Gochman, an engineer in Perlmutter's group, came to him with a suggestion. "He said if we could give up half the frequency, we could cut power consumption by half as well." Gochman and others set about designing the Pentium M--the chip at the heart of Centrino--using a combination of new Intel technology as well as designs from Intel's older and less powerful microprocessor, the Pentium 3. The result: By focusing on mobility rather than gigahertz, Intel created a winner. Centrino has delivered more than $5 billion in revenue since 2003, when it was introduced.

Perlmutter says distance has its advantages. (Intel thinks so too: 28% of its 7,000 R&D employees are located in more than 20 countries outside the U.S.) Outposts like Intel Israel lack the inertia of the home office. The outsiders, too, like to do things that are distinctive as a way of standing out. Finally, he says, groups far from the center of power have to work harder to stay in the loop. "We make it our business to know what's going on," says Perlmutter. From now on, the folks in Silicon Valley may want to work harder to figure out what's happening in Israel. --Adam Lashinsky