A sound move

E&T reflects on how the arrival of the MP3 player also signalled the rise of contract manufacturing in the consumer electronics industry.

Many sound-related engineering creations are dogged by controversy when it comes to determining who invented them. It happened to the telephone in the 1870s; it happened again to the radio a couple a decades later; and it happened once again in the 1970s with the invention of the portable music player.

Until not long ago, general consensus was that Sony was the legitimate creator of the personal stereo. Launched in Japan in 1979, the Walkman was such an instant global hit that only two years later it had been listed as a new word by French dictionary 'Le Petit Larousse'.

The official history of Sony dedicates nearly two full chapters to the development of the gadget. It's a colourful story that portrays co-founder Masaru Ibuka asking the tape recorder business unit to develop a light, playback-only stereo player that he could take with him to listen to opera on his frequent long-haul flights.

Even though his batteries went flat mid-flight, Ibuka was so pleased with the prototype he got that - as soon as he returned from the US - he showed it to his friend Akio Morita, then the chairman of Sony. Morita gave it a try, ordered an urgent meeting with a group of young industrial designers, electrical engineers, mechanical engineers and marketing specialists and set the ambitious target of developing and manufacturing 30,000 units in just four months.

Ten years later, the Japanese plants producing the Sony Walkman had already churned out more than 50 million units. What the official Sony story doesn't mention, however, is that - by then - the company was well aware of the fact that it wasn't really the inventor of the portable stereo cassette player.

That title, we now know, belongs to Andreas Pavel. A German-Brazilian audiophile more interested in philosophy than in the nascent world of consumer electronics, Pavel simply wanted to design a device that could do… well, what the Walkman eventually did. Only he managed to build one in 1972, seven years earlier than Sony.

Pavel took his prototype, which he named the Stereobelt, to several of the top audio manufacturing companies of the time, including Philips, Grundig, ITT and Yamaha. But none of them saw any value in the device - now regarded as the true forerunner of the iPod - and they kindly declined the offer to manufacture it.

"They didn't think people would be so crazy as to run around with headphones," Pavel said in an interview he gave to the New York Times at the end of 2005 - soon after receiving an undisclosed sum of money from Sony, believed to be over $10m, following years of court wrangling. "[They thought it was] just a gadget, a useless gadget of a crazy nut."

Stereobelt to walkman to discman

So the Stereobelt was never mass-produced and, for seven years, Pavel was the only 'nut' in the world able to enjoy stereophonic music while on the go. Indeed, he continued to use his prototype for many years, much to the surprise of fellow bus commuters who couldn't quite understand why he was wearing those odd headphones.

Following Sony's evident success with the Walkman, it didn't take long for other manufacturers to launch their own personal cassette players. Panasonic, JVC, Aiwa, Sanyo, Grundig and Philips all joined the party.

In 1984, the portable music player experienced the first major evolution in its short history. The wider music recording industry had just embarked on a mission to replace tape with the more versatile CD. Sales of the new digital format were initially sluggish, and much credit has been given to the launch of the Discman for the eventual take-off of the technology.

The world's first commercial portable CD player arrived to the market courtesy of - once again - Sony. As did the second major evolution of the portable audio player: the MiniDisk, which was launched in 1992.

The third - and, thus far, final - major technological evolution in portable audio took place in 1997. That year, a Korean firm called Saehan Information Systems introduced the world's first solid-state digital audio player - more commonly known as the MP3.

Named MPMan, the gadget failed to inspire consumers. There was nothing particularly wrong with the concept of using flash memory to store and play back digital music though, and Diamond Multimedia, the second manufacturer to have a go at producing an MP3 player (the Rio, launched in 1998), enjoyed a much more respectable market reception.

As with the Stereobelt and the Walkman two decades earlier, the MPMan vs Rio story confirmed an old engineering adage: being first to market with a new technology doesn't guarantee commercial success.

A shame nobody warned Forrester Research about it. When, in 2001, the iPod finally made its entrance into the four-year-old MP3 segment, the market research firm was somewhat sceptical: "Apple's new portable iPod MP3 player looks and sounds great. It won't redefine the market, but it will goose vendors like Rio to improve the music download and organising experience," was Forrester's initial reaction.

Won't redefine the market? Oops…

MP3 players

Redefinition of the market happened on more than one front when the iPod made its debut. The most obvious thing that changed was the cementing of the MP3 as the new de facto standard for portable audio.

"When MP3 players first came to the market they were quite slow to take off," says Sean Hannam, editor of UK electrical retailing title ERT Online. "People were quite reluctant to move away from established formats such as the CD Walkman. It was only really when the iPod was launched and it became such an iconic device that MP3 players started to become mainstream."

Redefinition also happened at a much grander level if you are to believe those sociologists who talk of the 'iPod generation' to describe the social and demographic characteristics of the children of today.

From a manufacturing point of view, the advent of the MP3 player coincided with a wider trend in the consumer electronics industry that saw a dramatic shifting of production to highly specialised contract manufacturing firms based on low-wage Asian locations.

The year before the iPod was launched, more than one in three of all jobs generated by the US computer industry were in the manufacturing sector. Only seven years later - by the time the Apple device had evolved into the more complex iPhone - that figure had shrunk to less than one in every six jobs.

This is hardly surprising when one considers how the iPod/iPhone and most other portable audio players are produced nowadays.

In the case of Apple's products, each device is entirely manufactured by Foxconn, a Taiwanese electronic contract manufacturing giant with plants in China, India, Vietnam, Mexico, Brazil, the Czech Republic and Hungary.

In general, what Foxconn, Flextronics, Inventec and other contract manufacturers do is essentially the final assembly and testing of the product. Although these companies are increasingly able to offer design and development services, these are not functions that Apple is prepared to outsource just yet.

Looking to build up a bigger picture of who does what in the manufacturing of a modern portable music player, a group of researchers from the University of California at Irvine have been studying the supply chain of the iPod.

In a report they published in 2007, 'Who captures value in a global innovation system? The case of Apple's iPod', the researchers used a tear-down report supplied by Portelligent to help them identify the complete list of components found in the 30GB version of Apple's fifth-generation iPod, launched in October 2005.

In total, that particular model included some 450 parts, mostly inexpensive components worth between fractions of a penny and $2. At the other end of the value scale, the 30GB hard drive supplied by Toshiba was by far the most expensive piece - it cost an estimated $73 then, approximately 50 per cent of the total bill of materials.

The next most costly parts of the Apple player were its screen (around $20, built by Toshiba-Matsushita), video processor chip ($8, Broadcom), CPU ($5, PortalPlayer), battery pack ($3, from an unidentified supplier), display driver ($3, Renesas), 32MB SDRAM memory ($2, Samsung) and back enclosure ($2, another unknown supplier).

The list of key suppliers shows that, even when Apple retains most of the profits made by each device, other American, Japanese, Korean and probably Chinese equipment makers are also benefiting from their success.

For this particular version of the iPod, Apple used Inventec as its contract manufacturing firm, which charged it an estimated $3.70 to insert, test and assemble each unit in China.

A deeper analysis of where each of the key components of the player was made reveals that the trend to offshore production to low-cost Chinese factories is not just restricted to the finished product. The hard drives fitted to iPods, for example, which Toshiba used to manufacture in Japan a few years ago, are now also assembled mainly in China and the Philippines.

More than music

Sound-wise, portable audio players might not have fundamentally changed since the MPMan arrived in 1997.

But unlike all its illustrious predecessors (the Walkman, the Discman, the MiniDisk and the standalone MP3), today's portable audio players can do a lot more than just play music.

"The humble MP3 player is now becoming much more of a multimedia and communications device," says Hannam. "People increasingly expect to be able to record video, upload it to YouTube or upload photos to Twitter or Facebook via a Wi-Fi connection."

The world's first portable multimedia player was introduced by French consumer electronics manufacturer Archos in 2002. Like most other OEMs, the company has traditionally outsourced its production while retaining all other activities in-house.

However, founder and CEO Henri Crohas reveals that that has recently started to change: "Up until the end of 2008, Archos' development activities were organised as if they were those of a Formula One team. Industrial design, product architecture, hardware development and software development were all performed in-house by us. But we have since made a very important strategy change."

Crohas says that, apart from manufacturing its new range of portable multimedia players, Chinese partners are now also involved in both their hardware and software development.

"This allows us to focus on what we do best: industrial design and product architecture," he says. "And we have our own quality control team to monitor every stage of the production process."

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