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Sunday, December 26, 2004

2005 : WiFi Stands Alone – Atheros and Broadcom To Shine

(Via Om Malik).Dean Takahashi of SiliconValley writes,Chips may be down next year if semiconductor industry forecasts are on target, but, Craig Barratt, chief executive of wireless chip maker Atheros Communications, is looking at a growth year in 2005. Atheros is profitable and shipping millions of chips a year that enable the high-speed wireless networking known as WiFi. IDC estimates that the WiFi chip set market will grow 42 percent a year from 2003 to 2008, with revenues rising from $805 million in 2003 to $2.4 billion in 2008. That's a much faster growth rate than the 11 percent a year predicted for chips overall. "If the chip industry has a downturn in 2005, this market niche will be a refuge from that," IDC analyst Ken Furer said. Atheros and other start-ups such as Airgo Networks have gained traction in a market that everyone expected to be dominated by larger companies by now. They are proving that constant innovation still pays off in market share. “WiFi is a lot bigger than just laptops. It's bigger than Intel,'' says Barratt, whose name is spelled almost exactly like Intel CEO Craig Barrett's but pronounced Barr-ATT. While some companies are profitable, that doesn't mean that making WiFi chips is a cakewalk. Since 2001, more than 50 start-ups and established chip makers have entered the market.

Pioneers such as Intersil and Agere have lost share to Broadcom and Atheros. Intel drove demand for WiFi with its Centrino marketing campaign, but it also has helped push prices lower. And players such as Texas Instruments, Conexant, and Broadcom hope to make life hard for start-ups by integrating WiFi into communications chips for cell phones. The chip makers that stick with WiFi will reap the rewards of a fast-growing market. But they will have to survive on thin margins and keep innovating as older chips become commodities and new technologies come along, says Joe Byrne, an analyst at market researcher Gartner. In that sense, WiFi resembles the graphics chip market of the 1990s, in which dozens of chip makers joined the gold rush to make 3-D animation chips. Nvidia, Intel and ATI Technologies came out on top after years of brutal competition. Technological changes matter in WiFi. Whoever comes up with the first chips in the alphabet soup of new standards takes market share. Intersil and Agere were technically competent at making radio chips and led the market for 802.11b chips, which transferred data at 11 megabits per second.
Atheros topped that with its 802.11a chips, which were up to five times faster. But last year Broadcom shot to the top when it came out with 802.11g chips that were just as fast and had lower power consumption
. Jeff Thermond, head of Broadcom's wireless networking business, said the company raced ahead of rivals when it decided to launch its chips before the final standard was approved. It assured customers such as Dell that its chips would be compatible with the standard. That helped Broadcom prosper from the Centrino craze. Intel fueled market demand for wireless networking with the May 2003 launch of its Centrino campaign. Intel sold what it calls a platform, or a bundle of chips that included microprocessors, PC chipsets and wireless networking chips and it guaranteed that they would all work well together. Intel launched a marketing blitz to trumpet the benefits of using wireless networks.In 2003,31 percent of laptops had WiFi built-in. In 2004,about 61 percent are expected to have it, according to IDC. Intel came to dominate the market for wireless chip sets sold to laptop makers.

Intel was slow to incorporate new standards into the Centrino platform. And Intel's own chips weren't ready so it chose to include chips from Texas Instruments, Philips Electronics and other manufacturers in its first WiFi Centrino products. Intel is now pushing a technology called WiMax, which could widen the range of a wireless network to as much as 10 miles in some areas. Wireless networking chip maker Airgo, hopes to repeat Broadcom's success in releasing chips before final standards are set. This start-up has shipped more than a million units of its high-speed wireless networking chips since October and is trying to blaze a new standard, known as 802.11n. The company's so-called ``pre-N'' chips can deliver a sixfold increase in speed and eightfold increase in range.The 802.11n standard isn't expected to be set until 2006, and so far there are warring camps led separately by Airgo and Intel. As WiFi expands to consumer electronics devices and cell phones, there are still a healthy number of competitors pursuing the market. Texas Instruments has pulled back on stand-alone WiFi chips but is focusing on making chips that function well even in close proximity with other radio chips in a cell phone.When WiFi is integrated with other things, companies with broader businesses have an advantage. Barratt at Atheros says it will be hard to integrate WiFi radio chips into other chips. He predicts a healthy stand-alone WiFi chip market for the foreseeable future. Trends to note :
A. The big is not necessarily the better, the faster one shall win , size does not matter beyond a certain level. More true in the Hightech industry.
B. Very interesting developments, pushing innovation and advancements to the edge and of course this makes the high tech, communication industry more vibrant,competitive and makes the industry more efficient with good correlation to economy and the consumers making the right choice in purchasing emerges the clear winner..

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