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Weekly Column

Let the Chips Fall: More 3G iPhone details and some H.264 stuff, too.

Status: [CLOSED] comments (57)
By Robert X. Cringely
bob@cringely.com

Last week I wrote about Apple's impending 3G iPhone and people got all worked up telling me how I was wrong. But since I KNOW that 3G iPhones are AT THIS MOMENT being tested in Florida by AT&T there has to be more to this story -- and there is.

Since last week's column there have appeared elsewhere a flurry of iPhone stories mainly attributed to Apple suppliers in Taiwan. There is supposed to be a Nano-sized iPhone, which of course would have no video or web browsing, an enterprise-quality iPhone (this sounds like a software upgrade to me) that will link with your Exchange server and various corporate apps, an iPhone minus the phone, which is to say a larger screen video iPod, and various souped-up GPS iPhones reportedly aimed at foreign markets. My experience of Taiwanese manufacturers is that they don't blab this much and especially don't blab about the vengeful Apple, yet a lot of this sounds perfectly logical -- over time. The key question for me is still the 3G iPhone and did I have it wrong?

Certainly I was wrong about my hopeful prediction that Apple had 3G hidden inside the current iPhone and could simply wake it up with a firmware change. The people who have been tearing their iPhones apart have confirmed that's not the situation. In my defense you'll note that I only said that I "hoped" this was the case, not willing to believe that even Steve Jobs would sell us $600 mobile phones and make them obsolete overnight.

The internal story at Apple about why the company didn't go straight to a 3G phone comes down to chips and batteries. A 3G phone would cost more to build, run hotter, and have less talk time. Apple reportedly intended to go to 3G eventually, but that might be dependent, they alluded internally, on a new generation of chips or a new generation of batteries.

I DON'T BUY THIS ARGUMENT.

Apple has had the iPhone in the works for three years and 3G had to have been on the drawing board for that entire time. If you run a company with the manufacturing clout of Apple and you have a device you are projecting will sell 10 million units in its first year then you can TELL chip manufacturers to make what you need and they do it. This is to say Apple probably could have had its 3G iPhone and its battery life, too, but for some reason that didn't happen. I have to wonder why it didn't happen and what Apple intends to do about it.

I think a lot of this comes back to that 10 million unit sales estimate for the iPhone's first year. In its first year on the market, the original iPod sold less than one million units, total. The iPod was in its third year before sales even approached a 10 million unit run-rate. What this shows us is that the iPhone is an iPod and not some new category of device. However accurate or inaccurate are the analysts at JP Morgan about the timing of next iPhone release, the gist of what they say is correct: the iPhone is the new form-factor high-end iPod and it will cannibalize current iPod sales if Apple doesn't carefully manage customer expectations. The technique they'll use for this management of expectations is one my Mom refers to as "lying."

All Apple stories are true, which means we will see a 3G iPhone, Nano iPhone, etc., etc., etc., and it is only a matter of timing that's in question. Will it be for this Christmas or early next year? I know AT&T is talking internally about a fall 3G iPhone rollout, but maybe that has solely to do with the network support, rather than the phone, itself. If the network is iPhone-ready in October or November, would Apple and AT&T still wait for January to ship the 3G phones? I am beginning to think they might.

Here's my thinking. Apple has worked hard to become a company not solely dependent for its success on Christmas sales. For years Apple would run at break-even for three quarters then make nearly all its profit for the year in the Christmas quarter, which used to be the fourth quarter and was later changed to the first fiscal quarter for exactly this reason. While monster quarters are nice, what's even better is selling huge numbers of units all year long, which much more efficiently uses infrastructure and results in stock prices that go up, up, and up. Apple has lately done a pretty good job of smoothing earnings thanks to the iPod and iTunes, which has grown so fast that holiday sales have become almost inconsequential. But in order to make this work Apple has to deliver new products all year, they have to exceed customer expectations on a regular basis and, of course, they have to manage those expectations so they'll have a benchmark to exceed. That's the lying part.

Apple will announce Christmas products in August and September. The company tries to announce products that are actually available but sometimes that doesn't work, generally for reasons of strategy. While it was important to Apple to pre-announce the iPhone, it is easy to argue that pre-announcing another iPhone would be more dangerous to Apple's own sales than it is worth. That's why I tend to believe a lot of this stuff is going to come in January. I could be wrong of course. Maybe a Nano iPhone for Christmas makes tons of sense, but with the first iPhone suffering some quality problems (variable battery life, faulty volume controls, bad screens, etc.) Apple will have more than its hands full with one absolutely new product, much less two. Then there's the phoneless iPhone (big screen video iPod) which I firmly believe WILL be here for Christmas because it is sorely needed, places the iPhone squarely within its iPod heritage, and ought to be less of a support headache being a derivative product.

I still think we'll see an iPhone firmware upgrade, if only to support all the iPhonic goodies that appear to be built into OS X 10.5 (Leopard) due to ship in September.

Remember how Leopard was delayed from May until September with the excuse that programmers and QA people were being shifted temporarily to the iPhone? I'm still scratching my head over that one, but with all the Leopard-specific iPhone additions I'm hearing about (file browser, disk mode, iWork, file search, copy & paste, better e-mail, REAL applications, and -- here's the one I like best -- iChat) it seems evident that a lot of the good stuff didn't make it to the 1.0 release. Enough stuff that maybe the Leopard iPhone upgrade will, by itself, be able to keep us all enthused enough to keep buying iPhones through Christmas.

Yeah, but what about the 3G iPhone? Say it ships in January. Does that really mean the early iPhones will be obsolete, offered on eBay for $0.30 on the dollar? That could be, but in my heart I hope it isn't. In my heart I hope that Apple's silly decision to make the iPhone battery not user-replaceable is actually a ruse for slipping in a 3G upgrade in early 2008. Or maybe I am wrong about that, too.

And speaking of making bad predictions, several months ago I boldly wrote that Apple would be adding hardware H.264 support to virtually its entire product line. This made sense to hardly anyone at the time, though the ability to support H.264 video ENCODING could have brought dramatic service possibilities to the Macintosh line (HD iChat anyone?). Well call me stupid, but at this point I'd like to specify exactly which H.264 chip I still expect Apple to use. It's the Type A H.264 Codec LSI from NTT Electronics, presumably a consumer version of the broadcast H.264 chip NTT Electronics introduced at the NAB show in April.

This consumer chip is sampling now and will be in mass production in October, which makes it too late for any Apple Christmas products but just right for a very interesting Macworld show in January.

Comments from the Tribe

Status: [CLOSED] read all comments (57)

Sorry - you're way off base with your comments about 3G and the iphone. Wander over to www.anandtech.com and look their article on the issue. The 3G chipset is much larger that the Edge/Wifi one used in the iPhone. And with the aid of a Samsung unit (sorry can't remember the model) show just how big and impact the use of 3G can have on your battery life.

So Apple could of used the 3G chipset and had a larger phone and half the battery life - neither of which they wanted.

marc36au | Jul 19, 2007 | 11:10PM

>> Remember how Leopard was delayed from May until September with the excuse that programmers and >> QA people were being shifted temporarily to the iPhone? I'm still scratching my head over that one...

The fact that you can't seem to puzzle this one out speaks volumes about what is wrong with your column Bob. Don't get me wrong, I enjoy reading it. But you have clearly never developed software in your life. And the daily grind of software development is really crucial to everything you write about. Jesus... at least pick up a copy of "The Mythical Man Month." It's 30 year old wisdom on how to manage a software development project, but I'm guessing it will be news to you.

y? | Jul 22, 2007 | 1:00AM

Hey, for a company that still only accounts for less than 5% of worldwide PC sales and a small % of ,,,anything really, Apple has been getting a huge part of Your attention Bob this year! Just look at your archive!

For the rest of us, who arent really that keen on what Apple WANTS us all to talk about (ie Steve and what he is up to) can we get back to normal life now pleeeeease?

Alex CHalkidis | Jul 23, 2007 | 7:38PM