I’ve been in Tel Aviv for almost two days and I still haven’t been able to shake off the jet lag, mostly because I’ve been so busy catching up with old friends, making new ones, and learning all I can about what’s going on in this tiny country, which has the highest number of startups outside of Silicon Valley. Here, working for a tech company is as much a part of life as being a member of the Israel Defense Forces.

I typically write about a startup after hearing about it from many different sources. It doesn’t matter if the chatter is positive or negative; if people make mention of a company, unprompted, in casual conversation, there’s almost always a good story behind it. These days Israelis are talking about Modu.

According to the chatter that I’ve heard while sitting in cafes and bars here, Modu, which was started by M-Systems founder Dov Moran (who sold that company to SanDisk for $1.6 billion), may already have or is close to raising a whopping $100 million from investors including some of its partners. The Kfar-Saba, Israel-based company has backing and relationships with SanDisk, Texas Instruments, Telecom Italia, BeeLine (VimpelCom) of Russia and Cellcom of Israel.

When I asked Guy Horowitz, director of strategy for Modu, about the funding, he declined to comment. Regardless, the chatter isn’t focused on how much money the company might be raising (it’s already raised $20 million from investors including Gemini Israel Partners and Genesis Partners). Modu is the first Israeli startup aiming to hit a home run in consumer electronics.

Modu has developed a tiny, 2.5G mobile phone — about the size of a cigarette lighter — that uses a Texas Instrument chips to pack in features including music playback, FM radio, GPS and of course, tons of memory.It is a mobile phone module that can be inserted into a sleeve. And depending on which sleeve it’s inserted into, its feature focus will change.

A sleeve with a focus on music can turn the phone into a music player. A sleeve with a Qwerty keyboard can turn it into a messaging device. What makes it possible is a tiny connector port hidden at the bottom of the device that interfaces with these sleeves.

“We are taking our cues from the fashion industry,” says Horowitz. Indeed, just like fashion changes every season, people can swap and change their sleeves but keep the basic innards of the phone — with all information, such as address book and music, intact. With each different sleeve, while basic functionality remains the same, the focus shifts to another function. And in the same way that you buy shirts from, say, Banana Republic or Faconnable, Mobu hopes that one day you’ll be able to buy these sleeves not just from them but also from retail stores, carriers and even small, specialized designers who will come-up with sleeves.

“Today it takes about 12 to 18 months to bring a phone to market,” says Horowitz. “And phone companies need to sell millions of units to recoup profits.” Modu, in comparison, can build and bring sleeves to market in less than a quarter — and they only need to sell some 100,000 of them to make money. From that perspective, their plan seems quite logical.

But Modu still has lots of work to do. After launching at Mobile World Congress in February, it has yet to deliver a product. It plans to launch its phone sometime this year, but it will only be a 2.5G version. A 3G version won’t be ready until 2009.

I think the lack of a 3G device is going to prevent Modu from getting any meaningful traction. Apple, while a newcomer to the mobile market, was able to buy time for a 3G version, mostly because it had a strong brand and a loyal cadre of fanboys (and gals.)

The lack of a well-known brand will prove a challenge for Modu, especially since the company is aiming for fashion-conscious users. While these consumers can afford to buy new sleeves to “show off” their expensive toys, this same group is almost perversely married to “brands” and would pay a premium for them. Carrier-branded phones, on the other hand, might not hold as much appeal. As a result, Modu needs to get a lot of “brand names” to develop “sleeves.” And in order to do that, it needs to spends tens of millions of dollars.

Horowitz said the company’s carrier partners are going to be spending millions to promote Modu devices because it would allow them to push mobile brands into the background. I wouldn’t hold my breath, for carriers’ loyalties are worse than the fidelity of a free agent in baseball.

Finally, Modu is going up against entrenched players with deep pockets, who can use discounts as a way to destroy the company’s plans. And a desperate handset maker, like Motorola, could always copy Modu’s idea.

But at least it makes sense why this company needs more than $100 million in VC backing. In fact, I get the feeling that it won’t be enough. Still, the fact that they’re doing something this audacious makes their story one worth following.

How Modu Works:

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OK, so AMD refuses to comment on rumors that it plans to introduce a low-power chip aimed at the mobile Internet device market, where it would compete with Intel’s Atom chipset and offerings from several other rivals. And it refuses to claim a block diagram floated by eeepcnews.de as its plans for such a chip.

I was kind of hoping AMD might stay out of this MID market opportunity and focus on its core CPU business and getting its promising graphics processor and CPU platform off the ground instead of chasing Intel, Nvidia, Via, Qualcomm and Texas Instruments and their hopes for a pocket PC market. Plus, AMD’s been here and done that — back in 2002, when it purchased Alchemy Semiconductor and its line of MIPS-based, low-power personal device chips. That deal was a response to Intel’s Xscale assault, and AMD turned around and sold the Alchemy line in 2005.

AMD did, however, keep the low-power x86 chips for the embedded and personal device market that it purchased from National Semiconductor in 2003. The x86 architecture was more familiar to AMD’s existing chips, and the Geode line is still used in low-power devices, but isn’t very fast and wouldn’t be competitive for the MID opportunity.

It’s surprising that AMD doesn’t have anything better on offer already. Especially given AMD CEO Hector Ruiz’s 50×15 project, which aims to get computers and broadband to half of the population by 2015. An AMD-designed, low-power, high-performance chip would have been perfect for the project and then later for the MID market. However, the One Laptop Per Child laptops AMD is using for the project use a Geode processor. If this diagram represents AMD’s answer to Intel and the gang, why the heck has it waited so long? They had a perfect market for an MID chip and they let it pass them by. If anything, AMD could have sacrificed short-term profits for large volumes if it had to. Its main rival isn’t shy about doing that.

In honor of Earth Day, we’re borrowing from our friends over at Earth2Tech in order to celebrate the infrastructure, gadgets and web sites that can help GigaOMers go green. Whether it’s chips that make your servers run cooler or web sites that will help you cut down on energy consumption (no, not Blackle), these topics are not only near and dear to our readers’ hearts, but a geek-friendly shade of green.

Get Your Surf On: These sites can help make the world (and the web) a greener place.

• 10 Green Social Networks You Should Know
• 5 Sites that Want Your Janky Gadgets
• The Network Effect On Carbon Footprints
• Video Conferencing for Greener Planet, Gore and Cisco’s CEO
• Your Bad Code is Killing My Planet

Data Center Dos and Don’ts: From energy management software to low-voltage chips, these stories will turn your scream machines into green machines.

• MIT and TI Develop Ultra Energy Efficient Chip
• Will Going Green Put Data Centers in the Red?
• The Quest for Green Data Centers
• Data Centers Are Sucking More Power From the Grid

Greener Gadgets: Technology may suck a lot of power, but it’s also helping consumers save it by way of a raft of devices — from cell phones powered by kinetic energy to flat-panel displays that use LEDs to keep things bright without incandescent light.

• IPod of Cleantech:
• Brighter Screens, Better Planet:
• Where’s All the Wifi-Embedded Smart Thermostats?
• Alternative Energy Powered Gadgets
• Powering Gadgets With Motion
• Better Lithium Ion Laptop Batteries
• Get Your Carbon Footprint on your Mobile

photo courtesy of NASA

With mobile phones hotter than PCs, it’s no wonder STMicroelectronics has paid $1.55 billion for 80 percent of NXP Semiconductor’s wireless division to create a wireless-focused joint venture. Everyone wants to be in the cell phone market. And for those who can’t, it’s mobile Internet devices all the way!

This deal is all about scale. STMicro is the No. 3 chipmaker for wireless chips and NXP is No. 4. Together, their joint venture will still rank third behind Texas Instruments and Qualcomm, but my guess is they combined their wireless divisions to stay in the running. In the chip world, when the going gets competitive, the competitive get bigger.

The move follows some of the logic proposed earlier this year by a French engineer who suggested NXP, STMicro and Germany’s Infineon merge. But instead of mashing three large chipmakers together, this involves pulling out specific divisions and creating a large player with singular focus — although anyone building wireless chips from 2G to LTE and Ultra-wideband to GPS can hardly be accused of a singular focus. My question is: What do they plan on calling this JV — “Alphabet Soup”?