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I was reading about USB specifications/configurations from this PDF.

On page 5 it says that USB power configuration can be achieved (can be configured) with 3 different power options.

USB power options

I have utilized a couple of USB hub ICs myself. I always go with the self-powered hub, as it is a configuration that tells the USB hub IC that every power situation is possible (the host might be unpowered, or the USB hub IC might be powered after the host, or both the IC and the host might be powered on together).

It always worked well, I had no issues using this power configuration, and I do not always let the USB hub be self-powered really. I might have it use the same power supply as the host, or be Vbus-powered. But it is configured as self-powered and always connects without issues.

Why isn't the self-powered hub the only configuration and do the other two configurations exist?

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A bus-powered hub can't provide the full rated power to multiple downstream ports at once, without exceeding the power limits of the bus that's powering the hub. If the hub is powered by a USB 2.0 port rated for 2.1 A at 5 V (which is generous for a data port, but let's say it can for the sake of argument), and you plug in two devices to the hub that each require 1.5 A at 5 V, the hub can't provide that power to both of them without drawing 3 A from its power supply, which it can't.

If the hub instead uses a separate power source that can provide more current, there's no problem. In fact, in that case, even if the bus can only provide, say, 100 mA, the downstream ports could still be rated to 2.1 A each.

As for the difference between configurations 1 and 3, the first one would be for when the hub is internal to the same equipment that also contains the host, for instance a computer motherboard. The third configuration would be for external hubs with a separate power cord.

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