Apple Changes IPhone Connectors. World Freaks Out - Businessweek

When Steve Jobs launched the iTunes Store more than nine years ago, he also unveiled the third-generation iPod, the first device with a plug design that has become nearly as significant to independent manufacturers as iTunes has to the music industry. The bottom-mounted connector capable of transferring songs and charging the music player is now a standard Apple (AAPL) component. Makers of mobile accessories use the plug’s specifications when designing chargers, cases, speakers, and stands for iPods, iPhones, and iPads.

That $1.3 billion-a-year market will soon be upended by the connector’s first overhaul since April 2003, according to several people familiar with the design of the new iPhone expected this fall. These people, who were not authorized to discuss the change, say the new plug will have only 19 connector pins, down from 30 in the port used by more than 600 million iPods, iPhones, and iPads, as well as millions of third-party accessories. An Apple representative declined to comment.

The long-rumored change is a huge opportunity for some mobile-accessory makers, says industry analyst Ross Rubin. “Customers will want to purchase new accessories that take advantage of the new dock,” he says, because he expects the new connector to enable faster data transfer. But manufacturers who took the design for granted aren’t thrilled. “I was talking with somebody in the car industry, and I mentioned the dock connector may change, and they got this panicked deer-in-headlights look,” says Kyle Wiens, the co-founder and chief executive officer of iFixit, which publishes consumer electronics repair manuals. “There’s an entire ecosystem built around a single connector that’s going to be obsolete.”

Apple executives are well aware of that. The company sells its own peripherals and enjoys a lucrative relationship with third-party accessory makers, who pay about $4 for each accessory in exchange for official endorsements on their products, according to a person familiar with the company’s licensing plan. Apple has long kept a close eye on the accessory market and in 2010 slapped patent-infringement lawsuits on companies that sold unlicensed iPod cables, chargers, and speakers.

Regardless of the disruption it will cause, the redesign is overdue. In recent years, Apple’s connector has been surpassed by sturdier, smaller, faster data-transfer jacks used in smartphones made by Samsung Electronics, Motorola Mobility (GOOG), and other competitors, Rubin says.

Wireless software is making plugs less critical, as new accessories can play music from an iPod, tablet, or smartphone without a physical link. And there’s some precedent for easy fixes to Apple design tweaks. In June, when the company announced that its new MacBook Pro would not be compatible with older power connectors, it also unveiled an adapter that costs about $10. Many third parties expect a similar move when the new iPhone launches, says Dominic Symons, the founder of accessory maker Bluelounge Design.

Even so, some companies have stopped making Apple accessories pending a formal announcement. “It’s a challenge,” Symons says, “because we have to wait and see what’s going to happen.”

The bottom line: A design upgrade for Apple’s connector, unchanged for nearly a decade, could mean new peripherals for much of its huge existing user base.