"The SDMI, so far, has yielded nothing," said Rainer Hoffmann, president and general manager of Micronas Semiconductors (San Jose, Calif.), a subsidiary of Micronas GmbH, based in Freiburg, Germany.

Officials at SDMI could not be reached for comment by press time.

"SDMI confusion is handicapping the MP3 player market today," Hoffman charged, calling the market for standalone portable MP3 players "stagnant" in 2000. "We need a simple story to sell MP3 players," but SDMI has only caused consumer confusion, he claimed.

Established two years ago, the SDMI is a multiple-industry effort to create a secure digital platform over which recording companies and other content owners can provide copyrighted music for download. The forum produced its initial specification, involving so-called Phase I screening technology, more than a year ago.

But many industry participants have criticized the lack of interoperability among SDMI-compliant music players, complained that no logo program is yet in place and lashed out at the delay in nailing down the digital-watermarking technologies necessary for rolling out Phase II-compliant systems. SDMI is still evaluating Phase II technology submissions.

The withdrawal of Micronas, which has been cultivating the Internet music market since its original ASIC triggered the MP3 player phenomenon worldwide, is one hint of industry discontent with the forum. Another is the fact that many system companies are not waiting for SDMI to complete its work before introducing products. SDMI member Thomson Multimedia SA, for example, plans to ship a series of digital audio consumer systems this year that are not SDMI-compliant.

"We're still at the table with SDMI," said a Thomson spokesman. "However, it seems to us that the more we get into the security discussion, the more fractured it becomes." He noted that Thomson "wants to sell products with SDMI circuitry" some day, but with a framework for secure digital music still unfinished, the company will field noncompliant systems in the meantime. The spokesman said that some of the proposals being suggested to SDMI by the recording industry are "off the wall."

Reason to stay, reason to go

Micronas' defection comes as a surprise to Gary Johnson, director of marketing at Cirrus Logic Inc.'s embedded-processor division. "Although the SDMI work may not be moving as fast as everyone wants, it doesn't make sense to pull out of it," said Johnson. SDMI is "still the industry's only organization that is making efforts toward securing music content, and you've got to know what content providers are thinking and what portable-device manufacturers are doing" — information that's available with membership.

However, Billy Pidgeon, an analyst at Jupiter Research in New York, said he wasn't surprised to hear of a company walking away from SDMI. Pidgeon said most technology and consumer electronics companies participating in the organization feel frustrated but are compelled to belong because they can't afford to alienate the recording industry, the content owners.

In addition, he said, "SDMI is hobbled in its efforts because there are many competing companies and industries within the organization." Pidgeon said he believes it will be difficult for SDMI to come to any consensus on the Phase II screening technology or to forge a framework that is of practical use.

"I agree that the SDMI activities have added some confusion to the Internet music-player market," said Will Strauss, president of market watcher Forward Concepts (Tempe, Ariz.). Despite frequent meetings, the forum "tends to remain so secretive that it's really hard to get real information out of it," he said.

Micronas, so far, is the only major chip vendor in the MP3 market to publicly give up on SDMI. But even among those who think it is important to belong, many see the SDMI more as a place to gather information, not as a powerhouse with the potential to kick-start an SDMI-compliant Internet music-player market.

One hugely unpopular SDMI feature is a proposed check-in, check-out technology that only lets consumers use an MP3 file ripped from their own CD collections a certain number of times before it is erased from the hard drive. To play the tune after that, the consumer is forced to re-rip the file. Thomson and many other system vendors believe such a feature would alienate users.

Moreover, analyst Strauss pointed out that for many music buffs, all the SDMI's good intentions — to secure mainstream music for distribution on the Internet — don't amount to a hill of beans. For many consumers, the allure of MP3 players lies in downloading MP3 files "for free," he said.

Opinions diverge on whether the market for standalone, portable MP3 players grew as much as the industry expected last year. Forward Concepts estimated that 4 million units of such players — not counting those that went into cell phones and other consumer systems — were sold globally in 2000, against 1.75 million units in 1999.

Though the market has not been as "stagnant" as Micronas implied, "compared to the cell phone market, which was as big as 400 million units last year, this is relatively small," said Strauss. At a time when some 50 companies are pitching their wares in a crowded arena, the sales figures "could have been disappointing to some," he said.

Lost opportunity

Micronas, in fact, has lost some brand-name MP3 player design wins. Cirrus Logic's ARM core-based Maverick processor is now powering portable MP3 players from S3 Inc.'s Diamond Multimedia division, as well as players from Creative Labs and Compaq Computer. Johnson said the Cirrus chip is also driving a new Pocket Concert audio player Intel Corp. announced this past week and set for demonstration at the Consumer Electronics Show in Las Vegas.

Meanwhile, portable Internet audio players from many Japanese consumer electronics manufacturers are using Texas Instruments Inc.'s DSPs, observed Forward Concepts' Strauss.

Micronas, however, pointed out that, armed with numerous design wins among Asian MP3 player manufacturers, it sold close to 4 million units of MP3 player chips in 2000.

One clear trend is that the MP3 file-playback function is finding its way into a host of products — cell phones, PDAs, home stereo systems, jukeboxes, boom boxes, TVs and even digital cameras. "Internet audio is definitely becoming a feature in all of those consumer products," said Cirrus Logic's Johnson.

Indeed, "We see a much bigger opportunity for MP3 playback capabilities to go inside cell phones, handheld devices and home entertainment systems" than in standalone music players, said Micronas' Hoffmann. He said consumer OEMs are looking for a one-chip solution they can simply add to their core system, so that MP3 playback becomes an extra feature in current-generation systems. The last thing they want is a cell phone that stops working as it implements MP3 playback functions, Hoffmann said.

With that in mind, Micronas will roll out a number of ICs and reference designs at the Consumer Electronics Show. The newly designed and highly integrated single-chip USB audio codec, designated as UAC-355xB, is one example designed to drive the USB audio from a PC deeper into home entertainment systems.

The codec provides a streaming interface that makes it possible to tie traditional home stereo equipment to the PC to deliver digital audio from the Internet. MP3 music files, once decompressed on the PC by using the power of the host CPU, can be streamed to a stereo or TV set via the Universal Serial Bus.

"Consumer OEMs can reuse LCDs or the on-screen displays of their own home entertainment systems to show MP3 file playlists," said Kai Scheffer, marketing manager of multimedia products at Micronas. "They can also reuse commands and controls for existing buttons and remote control for MP3 file playback."

Traditionally, a PC and a home entertainment system have been connected by the Sony/Philips Digital Interface or by an analog interface, which could not drive title information, user interface or remote control. Leveraging USB's two-way communication features and high-enough bandwidth, the communication between consumer systems and a PC has become "much easier," said Scheffer.

The recording capability of the company's new USB audio codec makes it possible to design the chip into consumer devices such as Mini Discs, car and home stereo systems, as well as USB headsets with recording capability and microphones for gaming and voice recognition.

Scheduled for release as engineering samples next month, the USB 1.1 audio codec integrates a two-channel A/D converter with microphone preamp, a D/A converter for two channels, a subwoofer, a 12-bit GPIO with LED driver capabilities and an I²C master-slave interface. The UAC-3556B will be priced at $5 in volume.

Micronas will also show in Las Vegas its latest MP3 chip, which enables both playback and recording of music in the MP3 format. Consumer systems using the new chip let users record from any accessible sources, not just the PC or the Internet. The real-time MP3 encoder unit can transform the music directly into MP3 format, so it can be stored on a flash memory card and played back on any MP3 player.

MP3 product parade

Similarly, Thomson Multimedia's new entries for 2001 include a second-generation Lyra MP3 player, the Lyra II. Based on a DSP, it is smaller and lighter than its predecessor and features an FM tuner. The unit, priced at $299, supports MP3, Microsoft's WMA and the Real Audio G2 formats.

The Thomson parade of products will also include a matchbox-size MP3-only player for under $149; a personal MP3/CD player for $169; and a bookshelf MP3 player/CD changer for the home for $399. By summer, the company says it will roll out a hybrid digital media manager that will have a hard drive, DVD drive, USB port and built-in electronic program guide so that consumers can build audio playlists on their TVs.

Forward Concepts' Strauss pointed out that besides MP3 jukeboxes, the new trend at the CES is CD players that allow consumers to read MP3 files. "Expect to find a lot of car stereo systems capable of MP3 playback, too," he added. "The biggest problem a lot of consumers are facing today is that they can't play back CDs they burned with their favorite MP3 files on their regular CD players."