Despite Standards Muddle, WLAN Chipsets Take Off

The Wireless LAN (WLAN) market made great strides last year, creating a burgeoning new market for semiconductor manufacturers. Worldwide WLAN chipset revenues reached $376 million in 2000, and although the slumping economy is dampening market prospects for this year with a projected decline to $319 million, the market should return to robust growth in 2002, according to Cahners In-Stat Group. By 2004, WLAN chipset sales including those for network interface cards (NICs), access points (APs), and building-to-building bridges will surpass $1 billion, In-Stat forecasts.

After the downturn this year, the only dark cloud on the horizon is concern that a variety of new WLAN standards about to enter the market may confuse customers. Soon, 5 GHz 802.11a chips will be available and the FCC is expected to endorse a higher rate version of 802.11b called 802.11g. As if the two new American standards were not enough, the European WLAN community is working to finalize its own 5 GHz standard named HiperLAN/2.

These new standards will offer higher speeds for WLANs, but also introduce more complexity into a market that has historically suffered from competing standards and incompatible technologies. In late 1999, the 802.11b Wi-Fi standard with just one air-interface was released, a development that finally offered interoperability among different manufacturers’ products. As a result, many new manufacturers entered the market.

But the 802.11a and HiperLAN/2 standards employ a different modulation scheme from Wi-Fi and are not compatible with each other. So much for compatibility. And to muddy the waters further, two other technologies, HomeRF and Bluetooth, are also players in the WLAN space.

Next generation HomeRF products that increase throughput from under 2 Mbps to 10 Mbps should be hitting the market shortly. In-Stat doesn’t believe, however, that this advance will be enough to offset a loss of HomeRF market share to 802.11b products that have quickly dropped in price recently and potentially to 802.11g and 802.11a products.

Although many had predicted Bluetooth—initially developed for targeted point-to-point short-range data links—would compete against 802.11 technology, this doesn’t currently appear to be the case, says Allen Nogee, In-Stat senior analyst. Still, massive support for Bluetooth has kept it moving along slowly but surely.

With so many standards emerging, one has to ask: “Do we need all these standards and will they all be successful?” The probable answer is “no.” What should the industry do in order to ensure widespread success?

· Finalize the 802.11g standard as soon as possible.

· Combine 802.11a and HiperLAN/2. Only one 5 GHz standard makes sense, so add the best HiperLAN/2 features to 802.11a, which already has substantial momentum.

· Harmonize 2.4 GHz standards and 5 GHz standards in tandem. Tri-band cellular phones exist, so why not dual-band WLAN devices?

Assuming the standards issue gets resolved, the WLAN IC market should enjoy robust growth from 2002-2005 and beyond. Although the corporate market is now the top segment, the residential market—only about 18 months old—is quickly gaining traction. In fact, by 2004, it will be the largest segment in the WLAN chipset market and will claim 48% of the market in 2005, In-Stat says. The boom in residential use is due to an increasing need to share Internet access among multiple PCs, low-cost WLAN products and a growing “cross-over” audience that uses WLANs at work or at school.

Many access WLANs through laptops, as the majority of current WLAN NICs shipments are PCMCIS cards for laptops. That dominance is likely to decline though, as USB desktop NICs have started to show up along with desktop PCI-based wireless NIC cards.

For laptops, the clear trend is towards embedded designs. Most designs place a miniPCI card under the keyboard rather than on the laptop motherboard. Thus, the WLAN card and the laptop can be certified separately, simplifying the process for laptop manufacturers. In-Stat believes the miniPCI will be the preferred form factor, eventually overtaking the PCMCIA card in popularity. WLANs are available in other form factors including CompactFlash and Handspring Springboard.

These varied options for OEMs and consumers along with the growing premium users place on mobility may make WLAN reality match the hype.

Deck:

The Wireless LAN (WLAN) market is creating a burgeoning new market for semiconductor manufacturers. Worldwide WLAN chipset revenues reached $376 million in 2000. After a downturn this year due to a slumping economy, the only dark cloud on the horizon is concern that a variety of new WLAN standards about to enter the market may confuse customers