Apple Dumps PortalPlayer Chip

Quash writes to mention a BusinessWeek article about Apple's decision to not use the PortalPlayer chip in a future version of the iPod nano. From the article: "PortalPlayer stock promptly shed $9.46, or nearly 42% of its value, and more than $220 million in market value. Apple generally doesn't discuss future products, nor its manufacturing or component supply strategies. It had no comment on the matter. But theories about who may have been the beneficiary of PortalPlayer's misfortune are abounding."

Comments

Why were they dumped?

[Whiney Mac Fanboy]

Interesting that this announcement from Apple came the quarter after PortalPlayer announced a new technology (called Preface) that's designed to work with Windows Vista only.

So - were they dumped for practical reasons or for punitive reasons? What do people think?

Onto a different aspect of this story - the company being touted as the most likely supplier of replacement chips is Samsung (allready a supplier of a good deal of ipod flash memory). Is it really wise for Apple to trust a competitor with components crucial to Apple's core business? (ipods are Apple's core business now).

Well, I guess Apple are happy doing business like this

Re:Why were they dumped?

[gEvil (beta)]

Maybe their CEO did not greet Steve in the coffee shop earlier that morning...

"I'm going to fucking kill PortalPlayer!"

Whoops. Wrong Steve...

Re:Why were they dumped?

[ClamIAm]

I don't believe that Samsung is a direct competitor to Apple in the DAP market, much the same way Dell isn't really a competitor to Apple in the desktop PC market. Apple goes after a pretty narrow market, and they're highly successful there. Samsung is more a more broad-ranging company sells tons of different things. It's a bit like comparing a small boutique carmaker to General Motors. Both make the same product, but are not really competing against each other.

Re:Why were they dumped?

[dsginter]

I think that we are close to seeing why Apple *really* switched to Intel. Put on your tin foil hat because I'm about to take you for a conspiracy theory ride:

1) Intel have been working with Ovonyx since 2000 on a technology called phase change memory (or PRAM, for short). Basically, PRAM uses chalcogenide - the same material used in rewriteable optical media - in a solid state RAM, only it is manipulated electrically, instead of optically. This gives the RAM nonvolatility and random accessibility. It is several orders of magnatude faster than flash (nearly as fast as DRAM) and has a write cycle endurance of 10^12 demonstrated as of about 4 years ago.

2) Intel patent applications have led me to believe that they have made great strides in the technology, while remaining very tight lipped. Here's some insight. Note that they are discussing the displacement of SRAM, DRAM and flash with this technology. Noteworthy, is the following:

[0058] Turning to FIG. 5, a portion of a system 500 in accordance with an embodiment of the present invention is described. System 500 may be used in wireless devices such as, for example, a cellular telephone, personal digital assistant (PDA), a laptop or portable computer with wireless capability, a web tablet, a wireless telephone, a pager, an instant messaging device, a digital music player, a digital camera, or other devices that may be adapted to transmit and/or receive information wirelessly. System 500 may be used in any of the following systems: a wireless local area network (WLAN) system, a wireless personal area network (WPAN) system, or a cellular network, although the scope of the present invention is not limited in this respect.

Now, here's where it all begins:

Envision, if you will, a high-speed, nonvolatile memory with very low power consumption. This enables the following:

1) Intel Robson Technology. This would answer the question of durability. Why would Intel demo such a technology if flash memory would wear out in short order? With PRAM, you've got CMOS compatibility so you can throw the whole deal right into the processor.

2) Ultra-low power wireless devices. Add Intel's Wireless USB and you've got the perfect medium to talk to your iPod. In addition, your gonna end up using it for more than just an iPod. Store your entire "desktop" on the damn thing, add some authentication mechanisms and you can use any wireless USB equipped PC to log into your "wireless personal server".

There's more, but this should be good for now.

Re:Why were they dumped?

[vought]

I think Portal has always had designs on the Windows Media/Media Center market. When I worked there a few months after the first iPod shipped, employees were strongly discouraged from talking about their then largest (and possibly only) customer. I worked there for six months and never heard the word "Apple" from a single employee.

The PP2002C,D, etc and PP5003 were good designs to get Portal off the ground, but it was never a product designed for Apple, just a convenient all-purpose dual core CPU with some nice specialized I/O logic. I think Apple probably found the PP500x series a convenient fit, but they can probably get away with less power and more specialization at this point.

I'd be happy that Portal is trying to move into other markets besides the iPod - relying on that one product line to move all their silicon was dangerous - although now they're really over a barrel unless they can ink some significant deals pretty soon - they've added, uh, quite a bit of staff since I contracted there in 2002, and instead of the oldish early '80s location in the silicon ghetto off of Scott Blvd. they're now in fancy new digs...but I still wish the tech pubs dept. would "get back to me".

Re:Why were they dumped?

[xoboots]

Looking at the last earnings report from Apple it seems that the REAL reason they switched to Intel was to lower overall component costs. Scale matters -- being the only retail game for PPC was putting a premium on Apple's marginal costs; since switching to the Intel ecosystem they reap the reward of using essentially commoditized parts.

So it wasn't really about a supposed technology ramp-up which they touted and I doubt they were banking on "future" technologies. The way I see it, it was simply a matter of the bottom-line: you really can lower costs when using high-availability parts. Go figure.

Never-the-less, that's some fun technology to be watching.

Re:Why were they dumped?

[camt]

Your conspiracy theory is well crafted, except for the fact that PortalPlayer provides the processing chips, not the memory, for the iPods. Apple already has a fairly long, prepaid contract with Samsung for the memory, if my own memory serves correctly.

That said, I wouldn't be surprised to see Intel processors (ARM or XScale?) on a touch/widescreen video iPod in the near future. So I think your theory may be correct about Apple seeing the benefit of a strong Intel partnership not just for the Mac, but for the iPod as well, but I think focusing on the memory is missing the target.

Re:Why were they dumped?

[CapnGib]

the REAL reason they switched to Intel was to lower overall component costs.

That is no doubt part of the story... but what could the cumulative per unit savings really add up to? While there is a very real cost savings on the cpu and associated architecture, the cost of the transition is huge. Rosetta development, maintaining support for 2 architectures, convincing 3rd party developers to ship UBs, Osbourne effect... If it really were only about saving a buck or two, it was a pretty risky move. Still, AMD could have given Apple cheap fast x86 compatible cpus for lower cost (Apple would have become AMDs biggest cpu partner overnight and thus could have likely brokered a pretty sweet deal). So if it were all about marginal costs on the CPU+arch, AMD would have been a better choice. Besides, Apple computers have always been premium-priced compared to WinPCs. They seem to be content in that portion of the market, even with Intel CPUs.

The Intel CPU switch is part of a big package. Not the least of which was the aging mobile G4 cpu. Apple promised consumers and investors faster powerbooks and 3gz powermacs for a long time. With IBM, they couldn't deliver and Steve, with egg on his face, had to give one lame excuse after another. The Intel switch made it at least look like Apple was committed to that promise and things are looking up for the mac division once again. Commodity arch makes possible faster powerbooks, imacs and eventually faster powermacs. Even if it cost Apple the same per unit it is necessary to keep the line alive.

Would the Intel switch make an Intel iPod chip deal more likely? Probably. This certainly put Apple in (even more of) a position to pressure PortalPlayer for cost or features. The iPod is still Apple's cash cow. Competing DAPs come and go with more features or lower prices. One day a non-Apple DAP will supplant the iPod. This is the market where cost REALLY matters and commoditized parts makes a BIG difference. Apple dumped Synaptics touchwheels in the name of cost. No doubt PortalPlayer saw the writing on the wall. Cheaper, better iPods are guaranteed, and necessary and this point. The Apple-Intel relationship makes that more likely than an Apple-IBM or Apple-AMD relationship.

Re:Why were they dumped?

[CapnGib]

The AMD infrastructure is still of a much lower volume than the Intel infrastructure and has fewer suppliers....

Even so, given AMD's traditionally lower costs, and Apple's (relatively) low volume, this could have likely been a cheaper way to make a mac.

What I find very interesting is the false presmise that Apple needed to switch their computing platform to Intel to be able to broker (speculatively I should add) unrelated technology deals with Intel that concern the iPod platform. There is little or no sense to that as far as I can see.

I wouldn't quite put it that way, but Apple will certainly get the cheapest suitable parts for the iPod line, regardless of vendor. That vendor could or could not be Intel, with or without the PC platform deal. One certainly doesn't necessitate the other. And one doesn't guarantee price deals for the other, but it might be possible, and I think that's what people are speculating about.

All that said, this switch to Intel certainly does give Apple many opportunities to leverage Intel's considerable product line...All of these things a player smaller than Intel could not provide.

This is well said and precisely why a lower cost CPU+arch is only part of the equation. I agree that Intel was the smartest choice, probably the only choice. The decision therefore was not whether or not to "go Intel" but whether or not to dump PPC.

Re:Why were they dumped?

[TheNumberless]

Once upon a time in Cupertino, some believe, around the year two double-aught six, head priest of the Apple, Steve Jobs, was walking down the road, contemplating whatever it is that a man of Steve Jobs' infinite power contemplates - which is another way of saying "who knows?" - when a PortalPlayer employee appeared, traveling in the opposite direction. As the CEO and the employee crossed paths, Steve Jobs, in a practically unfathomable display of generosity, gave the employee the slightest of nods. The nod was not returned. Now was it the intention of the employee to insult Steve Jobs? Or did he just fail to see the generous social gesture? The motives of the employee remain unknown. What is known, are the consequences. The next morning Steve Jobs appeared at the PortalPlayer headquarters and demanded of their CEO that he offer Steve Jobs his neck to repay the insult. The CEO at first tried to console Steve Jobs, only to find Steve Jobs was inconsolable. So began the massacre of the PortalPlayer headquarters and all sixty of the employees inside at the fists of the Apple. And so began the legend of Steve Jobs' five-point-palm-exploding-heart technique.

Not dumped entirely

[john82]

Apple has NOT dumped PortalPlayer entirely. At least, not yet.

Instead, Apple announced that PortalPlayer's latest chip will not be used in an upcoming version of the iPod Nano. PortalPlayer is the supplier for this particular chip in the current Nano and Video iPods. The announcement made no mention of changing the supplier for the current product line.

Seems obvious

[joebooty]

The Nano got destroyed by suppliers not being able to provide product when the Nano oversold estimates. You will all remember how we were flooded with nano commercials at launch and then the commercials disappeared and so did the Nanos because Apple could not assemble any units to sell.

With this move Apple shifts from having a critical part supplied by a bit player to the part being supplied by one of the behemoths of the industry in Samsung.

Furthermore the Korean semiconductor companies are infatuated with marketshare. I am certain Samsung offered them a tempting deal as long as they were the singlesource.

I just spoke to Dvorak, he knows.

[Tibor the Hun]

According to him it's Chevrolet!

You heard it here first folks!

Let Me Guess....

[dduardo]

They are switching over to Intel's Xscale processor. Since they are buying bulk Core Duos they must have gotten a discount on the PXA27x.

Re:Let Me Guess....

[feijai]

The XScale doesn't have enough integrated peripherals for it to be cost effective. It's also a power hungry beast compared to competition.

Nughhh, huh, what? What other processor pulls 0.001W/MHz and can run up to 600MHz?

As to integrated peripherals: the standard PXA package has sufficient facilities to pull USB, bluetooth, several serial ports, a color LCD, memory management, audio, various wireless and wired networking options, I2C, and a big honking cache on a single chip. There's a reason the Gumstix is so small. There's also a good reason why the XScale is so popular with PDAs. And there's a dang good reason why the Newton MessagePad 2K, almost ten years old now, is still surprisingly competitive.

It's not you, PortalPlayer...

[mekkab]

It's me. We'll always have the first Nano...

-Apple

Re:Massive Drop In iPod Demand

[monoqlith]

Ok, now you're simply making things up. From this article regarding Apple's most recent quarterly earnings reports:

"Apple said it shipped 1,112,000 Mac computers and more than 8.5 million iPods music players during the quarter. The iPod shipments represented a 61 percent increase over the same period last year."

Therefore what you have just said is patently incorrect. QED.

Re:Massive Drop In iPod Demand

[monoqlith]

Ok, now you're simply making things up. From this article regarding Apple's most recent quarterly earnings reports:
"Apple said it shipped 1,112,000 Mac computers and more than 8.5 million iPods music players during the quarter. The iPod shipments represented a 61 percent increase over the same period last year."
Therefore what you have just said is patently incorrect. QED.

Sorry, didn't post the link

Re:Massive Drop In iPod Demand

[Jerry Rivers]

"...as the massive drop in iPod sales shows."

For more information on this "massive drop in iPod sales" please read: http://www.ipodobserver.com/story/26405

Highlights from the above story:

  iPod shipments are up 61 percent compared to last year, and the company has now sold over 50 million units.

  The iPod market share is up, too, accounting for 78 percent of the portable music players sold. In December 2005, that number was at 71 percent

  Outside of the United States, the iPod is the top-selling MP3 player in the United Kingdom, Japan, Australia, and Canada.

Despite strong iPod sales, Apple sees room for major growth in the MP3 player market. Based on sales of other consumer electronic devices, Mr. Oppenheimer noted, "The MP3 player market has a lot of room for growth. According to Forester research, U.S. household MP3 player penetration was less than one quarter that of digital cameras as of the end of 2005."

PP is expensive!

[Fengpost]

Portal Player solution is very expensive. Last time I checked, it requires 2 ARM 7 chips with an external auio codec chip to run the the non video version iPod. There are plenty of more cost effective solution from the competitors such as Sigmatel, Philips or Freescale.

It is probably just a cost cutting move for Apple.

Re:PP is expensive!

[SeaFox]

Portal Player solution is very expensive.

With this huge devaluing of their stock, maybe Apple will consider buying the company outright.

What an internesting manipulation of the markets this would make.

1) Get annoyed at component costs for you main supplier of a hit product.
2) Leak that you are dumping them to put their stock price in the tank.
3) But company outright and do away with peksy contacts.
4) Profit by not having to pay the old company's margin anymore.

Re:PP is expensive!

[John Whitley]

The PP chip does not require an external audio codec (what do you think those two ARMs are for?).

You're confusing terminology on this point. The parent was correctly referring to the external D/A converter chip, such as the Intel Aduio Codec '97 chips often found in PC Hardware (and which the PPI chips support) or an I2S chip such as Wolfson Microelectronics' or Sigmatel's offerings -- which are more suited to the portable embedded space than power-hungry AC'97 chips.

So the parent's claims are that the BOM (Bill of Materials) costs for competing solutions will be lower in part due to the lack of an integrated D/A solution. This may or may not actually be true today -- also note that Apple's cost per unit for the PPI chip isn't public knowledge (or was that released when I wasn't looking?). As of a few years back, the integrated solutions I was aware of had MP3-specific hardware not amenable to Apple's use (recall, Apple needs MP3, AAC, the PCM formats, Apple Lossless, etc.). I'll also note that it can be a major PITA to integrate analog electronics on the same silicon as your digital electronics. Not for the faint of heart or those without some good analog engineers.

Disclaimer: I used to work for PortalPlayer. ;-)

Other Theories

[caramuru]

As an unhappy PortalPlayer stockholder, I have been reading everything I could find on the company since the news hit the street yesterday morning. The stock price has been driven down to less than two times the cash (on a per share basis) the company has in the bank - a very pessimistic valuation. Something not mentioned in the article is pricing. Some believe that either PortalPlayer has been too greedy or the new supplier (not known now) very agressively priced its chip. The new supplier might be Samsung, who already supplies flash memory for the iPod. Samsung could give Apple a "twofer" price on memory and processor. Another potential supplier might be Sigmatel. Until someone at Apple leaks the name of the supplier we will not know who the new supplier is. Apple employees, get busy! Doing business with Apple is not always a happy experience - ask IBM.

Re:Other Theories

[augustz]

So true. If the lexus of the space can't afford your product (and apple is the lexus of the mp3 space in terms of amount of money to burn) I'd say it's not going to be too popular with anyone else.

Search for portalplayer here: http://www.rockbox.org/irc/rockbox-20040811.txt

Granted, this isn't PR speak, but people wondering why in the world someone would use the product. Of course, as an investor, this is probably the first thing you are tracking, how good is their product relative to their competitiors. I'm just excited Apple has moved off them. Likely means we'll be seeing some good battery times.

They were dumped to use intel chips

[goombah99]

Cringley predicted this months ago. Cringleys speculation was that the reason Apple chose Intel over the nominally superior AMD was to get access to intel technologies on a broad level, including their low power embeded chips for the ipod. (Which they were familiar with from the Newton).

In related news...

[tomcres]

...Intel is expected to announce what it is going to do with all of the Pentiums with the FDIV bug that were recalled... stay tuned...

The reason they dumped PortalPlayer

[pslam]

...is because their chips were a buggy pile of putrid crap. Seriously I'm surprised they lasted this long. It's an underpowered chip by today's standards (ARM7TDMI? are they joking?), it's not the lowest power consumption available by a long shot, and they don't integrate enough peripherals to lower total product cost. They're years behind the competition now, and they have nobody to blame but themselves.

So, congrats to Apple for finally ditching them. You should all look forward to some better performing and longer lasting iPods in the future. Yes, I'm rather bitter from having to deal with the muppets at PortalPlayer in the past.

"so-called"

[M-G]

Does this drive anyone else nuts? FTA: ...one of Apple's main suppliers for so-called NAND flash memory.

It seems like anytime some media type doesn't understand tech, they drop 'so-called' in front of the name.

Re:Massive Drop In iPod Demand

[Anonymous Coward]

Holy shit! The crazy Apple fans are in full Protect The Hive mode!

Onward Mac Soldiers! Let the unbelievers perish in a hail of moderation!

Re:Could be good, probably not.

[a_nonamiss]

Apple also needs something a little more robust, to offer such features as some PDA like functionality, games, or better video support (i.e. HD video out).

Yes, Apple clearly needs to do something about it's 80% market share in the portable music player business. I mean, clearly, consumers aren't about to put up with this shoddiness.

Re:Massive Drop In iPod Demand

[aristotle-dude]

You are comparing a record breaking Christmas season quarter with the next quarter? Do you know anything about economics? There is always a significant drop in demand for consumer electronics in general in the quarter following Christmas. Looking at the year over year for the "same" quarter, there is a significant increase. The stats you quote may be accurate but your interpretation of the number is flawed.