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.