Researchers Expect Cheap Chips and Short-term Poor Hotspots

By Wi-Fi Planet Staff

May 29, 2003

The latest in Wi-Fi related research reveals that chip prices will continue to drop while hotspot locations will continue to grow -- though depending on where they are, they won't make much money.

Cheaper Chips

The price of wireless LAN chips is going to continue to drop like a stone, according to market research firm TechKnowledge Strategies.

According to their current findings, the average price of an 802.11-based chip in 2002 was $16.06 and will drop to $6.61 by the end of this year.

Even though companies will sell twice as many chips as last year (up to 41.3 million for 2003), the overall revenue will drop from $368.7 million last year to only $340.2 million this year.

The price/revenue decrease will take place because of the many companies coming into the market now with low priced chips, as well as oversupply by the big names such as Intersil, Atheros, Broadcom, and Texas Instruments. Expect to see some of the new players to be acquired or go out of business before they even hit the ground.

Other researches, such as Allied Business Intelligence in Oyster Bay, N.Y., also see chip prices falling, but says overall revenue will go up, with $522 million in sales by the end of 2003.

Another chip growth area for Wi-Fi is power amplifiers that can work with 802.11 chips. Whether silicon and gallium arsenide (GaAs), Allied says the market will have triple-digit gains this year followed by an annual growth of 50% through 2007.

Little Profit in Hotspots?

Forward Concepts of Tempe, Ariz., says operators are fighting to get public-access Wi-Fi venues -- in what it calls the "hotspot land grab" -- but few of those locations will make money with their Wi-Fi access. This according to their report Wi-Fi Hotspot Opportunities: Exploiting the New Phenomenon."

The report's author, Daniel Sweeney, Ph.D., says that until the end users become far more enthused about the possibility of wireless access out of the home and office, hotspots could be come much like e-commerce was early in the Internet age-- a solution without a problem.

Forward Concepts thinks the United States will have 46,000 hotspots in place by the end of this year, but 2004 will see a major downswing in hotspot deployments as people figure out the business models they need to follow. By 2005, things will pick up again and by 2007, there will be 530,000 hotspots in the States.

Analysys Research, headquartered in Europe, disagrees. It says hotspots will not be nearly as voluminous as originally predicted by operators. It estimates hotspots in the United States by 2007 will number around only 30,000 locations.

Analysys has also scaled back its estimates of how much hotspots will make by almost a third. Originally they estimated by 2007, hotspots in the United States would be making $2.8 billion -- now they're saying only $2 billion.

802.11 Planet Conference Curious what the other analysts out there think? Join us at the 802.11 Planet Conference & Expo, June 25 - 27, 2003 at the World Trade Center Boston in Boston, MA. Analysts from Allied Business and other firms will be on hand to discuss The State of the Wi-Fi Equipment Market.



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