Riding on air

Even as hopes for a wired broadband world are receding in the wake of the telecom bust, broadband-hungry consumers and office road warriors are adopting wireless networks as fast as any technology since the go-go days of 1999.

Thanks to the deployment of high-speed wireless data radios, travelers armed with laptops can fetch and send their e-mail simply by roaming within range of a wireless access point, which connects a wireless network to a wired network. In the United States, wireless connections taking advantage of unlicensed radio spectrum are sprinkled throughout several thousand airports, hotels and Starbucks coffee houses. Europe, Japan and South Korea also have tens of thousands of access points, known as "hot spots," for users.

But the biggest source of growth are the 55 million broadband users across the world who want to share high-speed cable modems or digital subscriber lines within their own homes and small offices, says Seamus Crehan, a senior analyst at the Dell'Oro Group, a research firm in Redwood City, CA. What's more, prices have fallen dramatically. As recently as 1999, it cost $1,500 to set up a wireless access point and $500 for add-in cards that could link laptops to an access point. Now access points cost $150 to $350 and clients cost as little as $75, says Navin Sabharwal, an analyst at Allied Business Intelligence Inc., a research think tank in Oyster Bay, NY.

"In the small office and home office, you have a unique situation of low prices and a killer application in sharing broadband lines," Crehan says. "That's why it's taking off."

The surprising strength of Wi-Fi, the street name for the wireless networking standard 802.11b, in the middle of an unprecedented tech recession is music to the ears of dozens of semiconductor companies who are vying to get a piece of a fast-growing market. The various flavors of 802.11 wireless networking, including the predominant Wi-Fi, are expected to prompt wireless chipset sales to grow from 18.5 million units in 2002 to 88.5 million in 2007, according to Allied Business Intelligence (see chart below).

Wi-Fi isn't the only wireless market taking off. Shipments of Bluetooth, a short-range wireless technology aiming to replace computer cables, have jumped dramatically in the last year. And a new high speed, short-range wireless technology, ultra wideband, is generating a wave of enthusiasm as the best way to transfer digital video among home electronics devices.

Wi-Fi is generating high revenue growth now because it hits the sweet spot in terms of cost, power consumption, data speed, range and readiness for deployment (see table below). Roughly 40% of the notebooks shipped this year incorporate 802.11b wireless radios. Those computers can connect to broadband access points—digital subscriber lines or cable modems in homes, or Ethernet networks in corporations—at speeds of 11M bps at a range of about 100 feet. Although actual throughput is only about half the data rate, that's still fast enough to handle most needs of road warriors.

"Wi-Fi has really hit its stride in the last six months," says Dennis Eaton, chairman of the Wireless Ethernet Compatibility Alliance, an industry certification group. "Wi-Fi chipsets are now shipping [at a rate of] 1.5 million units a month."

Intersil Corp., Irvine, CA, and Agere Systems Inc., Allentown, PA, make most of the chips for this market. Agere shipped 7.3 million chipsets last year and shipped more than 4 million chipsets in the first half of 2002, according to Tony Grewe, director of strategic marketing at Agere. Intersil declines to disclose its shipment numbers, but is generally regarded as the leader in this market (see "Analog arsenal").

But now these two are facing competition. "There's a lot of noise from people getting ready to come out with chips," says Grewe. "But not many are really shipping in volume."

New competitors emerging over the last two years include Texas Instruments Inc., Dallas; Koninklijke Philips Electronics NV, Amsterdam, Netherlands; and RF Micro Devices Inc., Greensboro, NC.

TI is spreading its bets across a wide range of products and combining wireless networking with its DSP chips to bring down overall system costs for cell phones and other gadgets, says Bill Carney, director of business development for wireless networks at TI. The company's latest 802.11b chips are expected to cut power consumption dramatically so that they can be used in cell phones, Carney says. TI began shipping 802.11 chips in mid-2000, after it acquired Alantro Communications Inc.

David Sorrells, chief technology officer of Parker Vision Inc.'s Direct2Data technologies division in Jacksonville, FL, claims that his firm has a more efficient way of converting radio signals into digital data, resulting in smaller and lower cost silicon for 802.11b. The company expects to field its chip early next year.

Other 802.11 technologies also are coming on fast, including hybrid 802.11 a/b chipsets and 802.11 a/b/g sets, leading to a veritable alphabet soup.

Atheros Communications Inc., Sunnyvale, CA, pioneered 802.11a. This high-speed version, known as Wi-Fi5, taps into a different part of the wireless spectrum—5 GHz versus 802.11b's 2.4 GHz—where it is less likely to interfere with household products. This version has a theoretical speed of 54M bps and a range of 100 feet, though it uses about a third more power than 802.11b. So far, Atheros is the only company shipping 802.11a chipsets.

"There's a lot of noise from people getting ready to come out with chips, but not many are really shipping in volume."
—Tony Grewe, director of strategic marketing, Agere Systems Inc.

Although 802.11a is good for transferring video from one part of a home to another, it will probably remain a small market. So far, 802.11a is only about 5% of the market, and Atheros acknowledges that it isn't yet making money. Instead, companies are expected to opt for a backwardly compatible combination of 802.11b and 802.11a, or its cousin 802.11g, which reaches the speed of 802.11a (54M bps) at the same frequency of 11b (2.4 GHz). Atheros has staked out the high end of 802.11a and is even developing a proprietary technology that can ship data at 108M bps, but Atheros will face more competition in the next six months or so from companies offering hybrid chips, says Atheros's CEO, Rich Redelfs.

For example, Bermai Inc., a start-up in Palo Alto, CA, is sampling a hybrid. Although the chip will initially combine only 802.11a and b, Bermai expects eventually to field a single-chip, low-power product that will incorporate all flavors of 802.11, according to Bruce Sanguinetti, Bermai's CEO. The company expects to ship the chip beginning this quarter.

Intel Corp., Santa Clara, CA, plans to launch an integrated 802.11 a/b solution with its Banias microprocessor early next year. By tightly integrating 802.11 a/b, Intel expects to cut costs out of the system and offer a low-cost packaged solution to computer makers. Intel CEO Craig Barrett said in October that an 802.11 a/b feature would be in Intel-powered laptops in the first quarter of 2003.

And Agere and Infineon Technologies AG, Munich, announced in mid-October that they would jointly develop hybrid a/b/g chips. Agere expects to sample the chips in Q2 2003, according to Grewe.

Beyond 802.11, there's Bluetooth, which transmits data at about 720 kilobits per second at a range of 30 feet. Although it took longer than expected to become a standard, today about a half-dozen vendors are shipping millions of chipsets every year. Bluetooth chipset shipments will triple in 2002 to 33.8 million units from 11.2 million last year, and the numbers will hit 1.1 billion in 2007, according to Sabharwal at Allied Business Intelligence.

The chipsets have hit their targeted cost of about $5, which makes them cheap enough to go into cell phones and other low-cost gadgets. Once they have enough Bluetooth enabled devices to create their own personal area networks (PANs), users can do things like check into hotels with their PDAs or print a document stored on their PDA by beaming it wirelessly to a Bluetooth-enabled printer. Most Bluetooth chipsets are going into cell phones. About 4.7% of cell phones have Bluetooth now, and that is expected to rise to 88% by 2007, according to Sabharwal. In addition, many Bluetooth chips are going into wireless headsets, which allow users to dispense with the wires that connect their ear/mouth pieces to their cell phones.

For now, many Bluetooth chips are probably going unused, but the real growth could kick in once a critical volume is reached, say proponents.

"Bluetooth is a technology whose value is a function of how much is deployed out there. The more chipsets that are out there, the more likely they will be used."—David Lyon, CEO, Silicon Wave Inc.

"Bluetooth is a technology whose value is a function of how much is deployed out there," says David Lyon, CEO at Bluetooth chip maker Silicon Wave Inc., San Diego. "The more chipsets that are out there, the more likely they will be used."

Observers believe that Bluetooth will coexist with 802.11 as a simpler file-transfer, PDA-synchronization and wire-replacement technology. That's because its costs are expected to drop to a couple of dollars and because it can operate on much lower power than 802.11, making it more practical for battery-operated PDAs and cell phones, says Sabharwal.

Cambridge Silicon Radio, Cambridge, England, and Silicon Wave have grabbed considerable market share by focusing solely on Bluetooth. Other contenders include Infineon Technologies AG, Munich; TI; Philips; and Ericsson Microelectronics (which is being sold to Infineon).

While Bluetooth and 802.11 seem to have clearly defined boundaries, the newest wireless contender overlaps with both. Ultra wideband (UWB) radio is a technology originally developed to allow military radar to detect objects behind walls or enemies below tree lines. Although the field is crowded in Bluetooth and 802.11, start-ups are finding that venture capitalists are much more excited about UWB, which is a few years away from going mainstream, says Ehsan Rashid, president and CEO of UWB start-up Emergent Micro Devices, Mountain View, CA. The Federal Communications Commission approved UWB in July, allowing it to operate at low power in the 3.1- to 10.6-GHz range.

UWB's short range of only 30 feet puts it squarely in competition with Bluetooth. But it has a spectacular data rate of 100M bps, which makes it ideal for shipping multiple streams of video among electronics devices in the home, such as set-top boxes and digital video recorders. Users won't put up with the slow speeds of Bluetooth when they're undertaking tasks like transferring video from their digital camcorder to their TV sets or computers, asserts Rashid. What's more, UWB has directional capability, much like the global positioning system navigation technology. Hence, UWB might be used by car makers to sense collisions or help users find lost remote controls in the household.

"If you are looking at transmitting data within the home, especially in the age of digital television, [ultra wideband] technology looks good."
—Geoffrey Anderson, a vice president at Sony Electronics' advanced wireless technology lab

For now, UWB isn't expected to compete directly with 802.11a because of its short range, says Stan Bruederle, chief analyst at Gartner Dataquest, San Jose, CA. But Rashid at Emergent Micro Devices contends that UWB can be stretched to nearly 100 feet, and that over time the FCC could revisit the restrictions on power usage, thereby allowing chip makers to increase the range of the technology. UWB also costs less to implement than 802.11a, contends Martin Rofheart, CEO of Xtreme Spectrum Inc., a Vienna, VA-based UWB chip company.

"If you're looking at transmitting data within the home, especially in the age of digital television, this technology looks good," says Geoff Anderson, a vice president at Sony Electronics' advanced wireless technology lab in Park Ridge, NJ. Sony has invested in UWB start-up Time Domain Corp., Huntsville, AL, even as it supports 802.11 and Bluetooth. "I don't think this will kill anything off," Anderson adds. "These technologies are all going to evolve and improve on range, cost, power and data rate."

Over time, wireless networking is expected to become ubiquitous as people find more and more unexpected applications for it. Among the zany new ways Wi-Fi is being used: the Sony Aibo robotic dogs have wireless capability so they can take pictures through digital cameras in their faces and send them back to their owners.

"It's applications like that, beyond the PC, that are going to make this even bigger," says Chris Henningsen, Intersil's vice president of marketing.

Dean Takahashi is a staff writer for the San Jose Mercury News. Contact him at dtakahashi@sjmercury.com.