Update: We have now confirmed with both headphone manufacturers and Apple that the control chip does not use an encrypted signal, but as part of the "Made for iPod" licensing program does incur an additional charge to manufacturers.
You'd never guess it was there—a tiny chip, barely a millimeter square, hidden inside the headphone module on the third-gen iPod shuffle. If you dismantle the module itself, you still won't see it: it's underneath a board containing a few simple copper traces, itself minuscule, and glued to the plastic. Even the traditional iFixit teardown gallery missed it.
We decided to take a closer look after iLounge reported that the third-generation iPod Shuffle's headphones had an "authentication chip" that Apple could use to turn something as basic as headphones into a proprietary licensing scheme.
By adding such a chip to headphones, Apple could force third-party manufacturers to pay fees to make headphones for its iPod Shuffle—after all, the device has no controls, so normal headphones are useless.
"This is, in short, a nightmare scenario for long-time iPod fans," wrote iLounge's Jeremy Horwitz. "Are we entering a world in which Apple controls and taxes literally every piece of the iPod purchase from headphones to chargers, jacking up their prices, forcing customers to re-purchase things they already own, while making only marginal improvements in their functionality?"
Even if someone invented headphones that worked without a licensed chip, that could amount to circumvention of a digital lock: Apple could shut them down using the Digital Millenium Copyright Act, provided the signal sent from the headphone buttons to the iPod itself is encrypted.
The Electronic Frontier Foundation's Fred von Lohmann followed up, exhorting gadget reviewers to looks closer:
One final thought: why have so many of the reviews of iPods failed to notice the proliferation of these Apple "authentication chips"?
What we found is a mystery to us: we're not electrical engineers. For all we know, it could be something the FCC made them put in so that it doesn't interfere with whalesong.
But it's an honest-to-god chip inside the proprietary headphones required to listen to the latest iPod, and it's hard not to wonder if Apple, with its 70% market share, just tried to eat the headphone industry whole.
If so, they've been planning it since at least the last update of the iPod line. According to the product page for the new "Apple Earphones with Remote", the new controls will also work with the most recent iPod Nano, iPod classic, and second-generation iPod Touch. That means that whatever sort of signal is being sent from the new headphones, it's been in the works before the latest Shuffle. And while the new headphones do not work with the iPhone 3G, it can be expected that they will be compatible with the next version of the iPhone.
If it's not an "authentication chip", then, what could it be? The current in-line click remote for the iPhone works by dropping the resistance on the second ring of the headphone's TRRS minijack connector, which the iPhone recognizes as a simple on or off. One click pauses. Two clicks fast forward.
It is possible the new Shuffle headphones simply send a pulse or other analog electrical signal to the headphone jack of the Shuffle, but we do not have the equipment to determine that ourselves. (Put a multimeter on the second ring of the new headphones, though, and you'll at least be able to see if different button presses causes different resistance, implying the controls work with analog controls, not a digital scheme.)
But it is also possible the signals are digital. "Digital" does not mean "encrypted", however. If the signals are not encrypted, then there would be no legal impediment to manufacturers making compatible and unlicensed headphones that work with the new controls. (Either way, regular audio headphones still work, although without controls they're useless on the Shuffle.)
If the signals are encrypted, it would mean that headphones with in-line controls compatible with Apple's latest (and future) iPods would have to be made with chips* available exclusively from Apple. Manufacturers attempting to reverse-engineer the simple three-button controls could be prosecuted under the DMCA.