The 802.11 Semiconductor Market Gets Tougher

The 802.11 wireless technology market continues to boom, but the shakeout continues to escalate as smaller firms restructure or disappear while big ones muscle in — meanwhile, the technology bar continues to climb.
Written by Russ Craig, Contributor

The 802.11 wireless technology market continues to boom, but the shakeout continues to escalate as smaller firms restructure or disappear while big ones muscle in — meanwhile, the technology bar continues to climb.

High 802.11x Semiconductor Growth Continues, but Life Is Tough for Many Suppliers
Aberdeen expects the 802.11x semiconductor market to almost double in 2003, to 40 million units — up from 22 million in 2002. This growth will be driven by continued uptake in the SOHO market and increasing interest in major deployments in the enterprise, as well as hotspot build-outs. The consumer multimedia market still is in its infancy — but initial products are expected for the year-end holiday shopping season. For example, Sony just introduced 15- and 17-inch LCD TVs with embedded 802.11a receivers in Japan.

Unfortunately, there are 45+ 802.11x supplier hopefuls, and even these volumes are not enough to keep them all in business. The MTEC Group closed its MTEC Wireless subsidiary in early April, and, more recently, Magis Networks underwent a restructuring that included most of the senior management. These actions continue a trend that started in early 2002, when Micro Linear shut down 802.11 development. In the fall, the Titan Corp. shut down its LinCom Wireless division, and Cirrus Logic closed its ShareWave division in December.

For Some Companies There Is a Silver Lining
Drawn by the promise of the huge market, some companies are strengthening their positions via acquisition. RF Micro Devices purchased Resonext last fall, and Anadigics bought power amplifier technology from RF Solutions. Philips, which had internal 802.11 development, purchased Systemonics late last fall.

TI’s major thrust is in consumer streaming multimedia with digital signal processors combined with 802.11b media access control (MAC) and baseband (BB) products — interestingly, TI has no 802.11x radio products. TI, Motorola, and STMicroelectronics are all rumored to be screening incumbents for acquisition candidates.

Taiwanese Companies Make the Situation Worse
As volumes have grown, various Taiwanese companies have entered the 802.11b MAC and BB chip market. Realtek Semiconductor and ADMtek both supply these products, and they have helped to drive the price below $6 in volume. Ali now bundles its MAC/BB chip with a radio frequency (RF) device from RF Micro Devices, but it will launch its own RF offering in Q3, followed by 802.11a and g devices in Q4. MediaTek and Airoha Technology are also offering their own RF devices.

As virtually all 802.11x system-level product is manufactured in Taiwan or the People’s Republic of China (PRC), local suppliers tend to be extremely interested in this market. Zyxel Communications, which supplies WLAN system products, has gone so far as to backward integrate into 802.11b semiconductors in its ZyDAS Technology subsidiary. Aberdeen expects to see more Asian semiconductor firms enter this market.

The Technology Bar Also Goes Up
Meanwhile, Atheros, the 802.11a market leader, has increased the performance of its devices in two key ways — bandwidth and reduced power consumption. Super A/G and Super G turbo modes deliver a 108-Mbps data rate through the use of a combination of standards-based features, application of compression technology, and the use of a second channel. This translates into 90 Mbps of throughput for TCP/IP data like e-mail, PowerPoint, or XML documents. These chips are fully compatible with 802.11a, b, and g WiFi Certified product, and they automatically switch between standard and turbo modes to accommodate both categories of users on the same network.

Power consumption benchmarks are also interesting. Atheros devices can deliver 10% to 15% longer battery life than some other 802.11 products. Is it any wonder that HP, IBM, NEC, and Toshiba have chosen them for embedded multimode WLAN capability for their laptop products?

Aberdeen Conclusions
An oversupply of existing competitors, new ones appearing as market volume grows, and large companies buying their way in will cause the shakeout to continue, according to Aberdeen. Furthermore, an increasing performance gap between the best chipsets and the rest will push the laggards into a commodity role with price as their only possible differentiator. A few lucky companies with good technology will get purchased, whereas the rest will search for later round venture funding while paring back burn rates. Taiwanese and PRC semiconductor companies will become the dominant force in the most cost-sensitive portions of the market, with extremely aggressive pricing. When Intel begins to ship its own silicon in Q3–Q4, the bloodbath will really begin.

Aberdeen originally published this article on 19 May 2003

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