1. Made the iPhone slimmer --> a complex proprietary chipset is not required to achieve this
2. Faster (good, of course) --> a complex proprietary chipset is not required to achieve this
3. It looks like it supports digital audio, which would increase audio quality! --> you won't notice a difference with the compressed crap on iTunes anyways, or any of the supported formats you can import to iTunes
4. Made some old docks not work anymore without an adaptor or sometimes not at all (bad, of course) --> we agree on this
5. Made it easier to plug your iPhone in (good, of course) --> a complex proprietary chipset is not required to achieve this
For number 5, it actually is required. Anyway, I was just listing what Lightning does for us, whether or not it requires a complicated chipset. I don't know enough about this to say anything specific about it, but I'd assume that the idea of switching which pins do what at a certain point in time on the Lightning connector gives Apple more flexibility in the future.
As for the iTunes thing, haven't you heard of ALAC and AIF? iTunes supports these. You can have all the high quality music you want. I don't use the iTunes Store because it's overpriced and low-quality, but iTunes/iPod can deal with CDs just fine.
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A few observations:
1) Mico USB would never work. Can you imagine how hard a micro-usb dock would be to use?
2) there is already a very simple "reversible" connector. The coaxial power conector is one example. the headphone jack is another. Round connectors work well. Look at the iPod "shuffle" it uses the round headphone connector as the ONLY connector. the data moves through it just fine.
Next you ask how can you get a "ton" of data through only a few wires in the headphone jack. Look at the four wires in your gigabit ethernet cable. All of the internet including streaming HD video and even "power over Ethernet" comes over that wire.
As an engineer, I say Apple failed. When I think of something I keep cost in mind. A nifty idea is not workable if the cost is way out of line from what the customer wants. Everything you design can be designed to a price
One thing in Apple's favor. Perhaps this connector will be used in other ways and in devices we have yet to see. Maybe Lightening will appear on disk drives and monitors and the next macbook. After all what is the point is "asignable pins" if you have only one device? I assume the pins get reassigned when this is used for a disk drive.
Ethernet actually has 8 pins. There's obviously no point of reassignable pins right now, but it must provide flexibility. Otherwise, there's no reason why Apple would go to the extra cost and trouble of doing this. It's not even like they make more profit from making the adaptors expensive.
What I always marvel at is how coax (ONLY 2 PINS!!) provides all of those HD TV channels. And it also carries network data, the gigabit speeds you see in ethernet, as it's frequently used to connect routers to modems. And it's perfectly round.