The world in the iPod, revisited

Live by the iPod, die by the iPod.


Andrew Leonard
April 25, 2006 11:00PM (UTC)

A little less than a year ago, as the first step in what ultimately became this blog, I wrote a story about PortalPlayer, a Silicon Valley chip design company that struck it rich when Apple chose its multimedia chip to be the brains of the iPod.

With its design teams in India, manufacturing handled in Taiwan and China, and headquarters in Santa Clara, Calif., PortalPlayer is a true creature of the global economy, endlessly seeking an edge anywhere it can find one. And for good reason. The semiconductor business is brutal -- one misstep and a host of competitors are cutting in on your parking spot.

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Last week, an article in BusinessWeek reported that PortalPlayer had just announced that the next planned version of the iPod Nano would not include a PortalPlayer chip. "PortalPlayer stock promptly shed $9.46, or nearly 42 pecent of its value, and more than $220 million in market value," reported Arik Hesseldahl.

Theories abound as to the reason. Maybe Korean chipmaker Samsung offered a better deal. Maybe PortalPlayer's newest chip was too complicated. Apple's not talking, and PortalPlayer is unlikely to spill the beans. But executives at the small chip designer can't be happy. Apple was responsible for the vast majority of PortalPlayer's revenues.

But PortalPlayer's woes, ironically, make the company all the more emblematic of how the world works. The new global economy offers only the most fragile of footholds to those who struggle to claw out a profitable niche. Veterans of Silicon Valley's frenetic business culture have long known this truth more intimately than most -- but the increasing anxiety felt throughout the United States in response to foreign competition is a sign that everyone is getting the message.


Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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