Internet & Technology
Tuesday, February 10, 2004
Wi-Fi Network Buyers Have Choice To Make
--------------------------------------------------------------------------------
Chipmakers Waging Heated Wireless War
BY JAMES DETAR
INVESTOR'S BUSINESS DAILY
More and more computer gear has gone wireless lately.
That's created a hot market for wireless chips. And chipmakers have been slugging it out to see who will lead.
Intel Corp. (INTC) on Jan. 15 rolled out its latest wireless chipset. This two-chip set, dubbed 2200BG, is a lot faster than the firm's first wireless chipset, introduced 11 months ago.
"The key for consumers is we're adding a new Wi-Fi technology to up the speed by over three times" compared with the company's first Wi-Fi chipset, said Intel Vice President Jim Johnson. He manages Intel's Wireless Networking Group.
Wi-Fi is short for wireless fidelity.
Analysts say the new chipset could help Intel take the sales lead away from market leader Broadcom Corp. (BRCM)
"Although Intel tends to come late to a market, it's the classic 800-pound gorilla. They dominate a market once they come into it," said Piper Jaffray & Co. analyst Ashok Kumar.
The 2200BG, formerly code-named Dothan, is compatible with the older, slower version of the 802.11 wireless standard.
For the new chipset, Intel makes both chips. It had made only one of the chips in its first one. Making both chips lowers Intel's costs. And, hopefully, it will cut the price that consumers pay for wireless notebook computers.
Analysts say Intel will almost surely take the lead in notebook wireless chipsets. But Broadcom, Atheros Communications Inc., Texas Instruments Inc. (TXN) and others will likely start selling their chips into other markets.
TI, for example, is the leader in cell phone chip sales. It's a natural for it to turn to that market with its wireless chips.
Broadcom Chief Executive Alan Ross says his company is also looking for greener pastures for its Wi-Fi chips. For instance, fast, wireless modems. That's a natural fit for Broadcom, which already makes fast DSL and cable modem chips.
Those are markets that Intel likely won't go into with its Wi-Fi chipsets, says iSuppli Corp. analyst Scott Smyser.
"I don't think you will see Intel sell into the non-PC market. If Intel has its way, everyone will have mobile PCs with their Wi-Fi chipsets inside," Smyser said.
In 2003, Broadcom was the top Wi-Fi chipset maker. According to International Data Corp., Broadcom sold 11 million chipsets last year. That gave the Irvine, Calif., company a market leading 21% share.
That easily tops No. 2 Globespan Virata Inc., (GSPN) which sold 7.5 million chips. Conexant Systems Inc. (CNXT) is in the process of buying Globespan. TI was about even with Globespan in sales.
Atheros Communications came in fourth with 6 million units. Private Atheros has filed to go public early this year. Intel rounded out the top five with 5.8 million units sold, for an 11% share.
More Mergers?
"It's a hot market. It's still growing. But I think you will see more consolidations this year," iSuppli's Smyser said. He expects that will happen as bigger companies try to gain share and outsiders like Conexant try to gain entry.
Piper Jaffray's Kumar says Intel will be at the top of the heap by year-end.
"At the end of 2004, it will be Intel, followed by Broadcom and the rest of the stack," he said.
ISuppli's Smyser agrees.
"Intel is targeting the mobile PC space and announced they would target the desktop space as well this year. For mobile PCs, they have gained a lot of share and I see them continuing to gain share," he said.
But Intel's first high-speed Wi-Fi chips will be mainly for notebooks, Johnson says. "We focused to keep our performance as high as possible. That's what people want."
The market is attractive to chipmakers because Wi-Fi hot spots are springing up around the world.
Hot spots have Wi-Fi gear that lets people with notebook PCs come in, sit down and connect to the Web without plugging into a telephone jack. There are about 30,000 in the U.S. alone. They're in coffee shops, fast food restaurants and other locales. Some businesses are installing Wi-Fi hot spots throughout their facilities.
Intel will use the 2200BG Wi-Fi chipset in its Centrino chip package for notebooks. Kumar forecasts that 50% of notebooks will use Centrino chips by the end of 2004.
Centrino includes the Wi-Fi chipset and a Pentium M microprocessor for mobile PCs. A microprocessor is a computer's main processor, or its "brains."
Kumar says Intel may also be able to do some bundling with its new chipset, cutting PC makers a deal if they buy both the Pentium M and the new high speed chipset. PC makers can buy the Pentium M mobile processor from only Intel. But they have the option of buying either Intel chipset or someone else's to go with that processor.
So how is Broadcom responding to Intel's challenge? Broadcom says it's doing just fine, thank you, even with the 800-pound gorilla in its back yard.
Broadcom released its earnings on Jan. 27. In the fourth quarter, the company beat analysts' estimates of 17 cents a share with a profit of 19 cents on record revenue of $479 million. That was a 1,050% gain in earnings and a 62% jump in revenue compared with the same quarter a year earlier, when Broadcom lost 2 cents per share on sales of $295.9 million.
'Good Start'
Chief Executive Alan Ross says Broadcom isn't too worried about Intel's entry into the high-speed Wi-Fi chipset market.
"Broadcom's share of (such) products has recently risen to 78%," Ross said in the earnings conference call. "I've told our people that's a pretty good start."
There's a fly in the ointment, though. Although they're not in the Wi-Fi market yet, Asian chipset makers could pose a threat to Intel, Broadcom and other U.S. Wi-Fi chipset makers.
"You have Asian chipset makers in the mix. They will take some position as well" in the Wi-Fi market, said iSupply's Smyser.
If Asian chipset makers like Via Technologies Inc. and Silicon Integrated Systems, both in Taiwan, make a push into Wi-Fi chipsets, they would have a natural advantage.
"About 80% of production of Wi-Fi equipment is done in Taiwan," Smyser said. |
