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Cable modem wars heating up
By Darrell Dunn
EBN
(05/10/02, 03:33:48 PM EST)
Design battles between the leading IC suppliers to the cable modem market are escalating even as the average selling price of high-speed broadband equipment plunges.
Competition between Broadcom Corp. and Texas Instruments Inc. intensified this week when Motorola Inc., the industry's largest supplier of cable modems and previously an exclusive Broadcom customer, disclosed plans to begin using a TI chipset in an upcoming cable modem product.
In addition, Broadcom, Irvine, Calif., this week filed a countersuit against Microtune Inc., a supplier of RF tuners for cable modems and set-top boxes that accuses Broadcom of patent infringement in February 2001. The countersuit came two weeks after Microtune and TI unveiled an agreement to jointly market and develop cable modems.
“Pricing pressures have been phenomenal in this market over the past year or so,” said Brett Butler, general manager of TI's cable broadband business unit, based here. “If you talk to any of the major cable modem suppliers, you get a sense they need to reduce all their costs, and of course that trickles down to us.”
Jim Fontaine, chief strategy officer at Microtune, Plano, Texas, said retail cable modem prices plummeted from about $250 in 2000 to less than $100 last year, which was exacerbated by the departure of 3Com Corp. from the market. Modem prices continued to drop to around $50 this year, and are expected to decline further, Fontaine said.
“Modem vendors are attempting to keep the prices up by offering more features, but other pressures are going to continue,” he said.
Outside threats
Traditional modem suppliers also are expected to experience increased pressure from lower-cost manufacturers in Taiwan, although some observers believe that threat remains a year or two out. Those that stand to lose the most include Motorola, which controlled about 36% of the 9-million-unit cable modem market in 2001, Toshiba Corp., which held 17.5% of the market, and Thompson Multimedia, with 14%, according to the In-Stat Group, Scottsdale, Ariz.
“About 90% of all modems are still sold directly to the service providers, and the threat of the Taiwanese manufacturer is more in the retail channel,” said In-Stat analyst Mike Paxton.
Another possible threat to silicon providers and modem manufacturers that don't also compete in the set-top-box market is the potential growth of controlled computer cable modem technology. The advent of CCCM devices is expected to create conditions similar to the analog modem market, where many functions eventually moved to a host processor as standards and features became more defined.
“I haven't seen much progress there as yet,” Paxton said. “It did happen in analog modems, but even so there are still millions of [stand-alone] analog modems shipped each year.”
Paxton said he believes Broadcom, which currently controls about 70% of the cable modem IC market, and TI, which has a 25% share, will both be able to weather pricing pressures.
“They realized when they got into this market a couple of years ago that they couldn't sustain 60% to 70% margins,” he said. “But with 9 million two-way cable modems shipping last year, even if the profit margin is only 5%-and it's still higher than that-that can be a huge chunk of change.”
Multisourcing
Paxton believes that although Motorola's design win was significant for TI, Broadcom will remain the Schaumburg, Ill., company's primary supplier.
“Motorola has always emphasized that they like to multisource all components when possible,” he said. “You would like to have the world's largest cable modem manufacturer only using your chipsets, but that's probably not realistic. If you're Motorola you need to multisource to ensure you're getting a competitive price on the silicon.”
Last week a Broadcom spokesman said, “Bottom line, we will continue to be the primary supplier of cable modem chips to Motorola and to the industry.”
Meanwhile, the agreement between TI and Microtune should be good for both companies, Paxton said. TI has used Microtune's “can” tuners in past reference designs, but modem manufacturers are increasingly turning to silicon tuners for new designs. After studying the cost of developing its own silicon tuner in-house, TI opted for a third-party solution from Microtune.
Meanwhile, Broadcom confirmed that it sued Microtune after receiving a new patent a month ago that it believes will supersede its rival's patents. Microtune's original patent infringement suit against Broadcom is being processed in a U.S. district court in Texas. |
