iPhone 3G Glitches Blamed On Chip

Dropped calls and choppy Web surfing on Apple's latest smartphone stem from a faulty Infineon chip. A software fix is on the way.

Complaints over dropped calls and choppy Web connections on Apple's iPhone 3G have sparked a wave of debate in the blogosphere over the root cause of the problems.

Two well-placed sources tell BusinessWeek.com the glitches are related to a chip inside Apple's music-playing cell phone.

The sources add that Apple (AAPL) plans to remedy the problems through a software upgrade rather than through a more disruptive step, such as a product recall.

The news reinforces analysis by Richard Windsor of Nomura Securities, who said in an Aug. 12 report that the problem involves a communications chip made by Munich-based Infineon Technologies (IFX).

Faulty software on the chip causes problems when the iPhone needs to switch from wireless networks that allow for faster Web downloads to slower ones, the people say.

Users of the iPhone 3G complain they're unable to get the faster connections available on so-called 3G, or third-generation, wireless networks even in some areas where 3G networks are in place.

Owners also lament frequent shifting between high-speed and slower-speed networks during calls and Web sessions. The handoffs sometimes result in dropped calls. The problem is affecting 2% to 3% of iPhone traffic, the people say.

That compares with a dropped-call rate of around 1% for all traffic for AT&T (T), Apple's exclusive partner in the U.S. "This is a problem, but it's not a catastrophe," one of the sources says.

Still, it's causing enough disruption that the Internet is abuzz with complaints over the phone's performance and speculation over how much blame lies with Infineon's chips.

Infineon spokesman Guenther Gaugler declines to comment on the chip's performance in the iPhone 3G, but says the chips haven't resulted in comparable problems in other phones, including those made by Samsung.

"Our 3G chips are, for example, used in Samsung handsets and we are not aware of such problems there," Gaugler says.

Apple, which has refused to acknowledge there is a problem with the iPhone's performance, declined to comment for this story. AT&T issued a statement saying, "Overall, the new iPhone is performing just great on our 3G network."

One source says the problem lies squarely with Infineon's technology, which is fairly new and untested in high volumes outside a lab setting.

Not only is the iPhone shipping in much higher volumes than other handsets, it's also gobbling up far more 3G minutes as owners use it to surf the Web, watch YouTube (GOOG) videos, and utilize other bandwidth-hogging services.

As much as the chip may be the chief problem, glitches may also stem from Apple's software or the AT&T network.

Part of the role of the Infineon chip is to check whether there's enough 3G bandwidth available in a given area. If 3G isn't available or there isn't enough bandwidth, the iPhone will be shifted to a slower network.

One source says Apple programmed the Infineon chip to demand a more powerful 3G signal than the iPhone really requires.

So if too many people try to make a call or go on the Internet in a given area, some of the devices will decide there's insufficient power and switch to the slower network—even if there is enough 3G bandwidth available.