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802.11b chipset prices could fall 75% this year

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The Register's Wireless LAN Channel

WLAN chips based on the 802.11b standard are set to get even cheaper as Taiwanese vendors start pushing low-cost wireless networking parts during the second half of the year.

And 802.11g parts are expected to become rapidly less expensive now that the specification has to all intents and purposes been ratified as a standard.

The average price of 802.11b chips this year depends on who you talk to - Allied Business Intelligence says $6.06, while TechKnowledge Strategies says $6.61, for example - but $6 is a good round figure.

But Taiwanese chip maker sources, cited by DigiTimes, say that figure could fall to as low as $4, and possibly even lower than that.

Last year, the average price was $16.06.

That's competition for you. While demand for 802.11b products is ballooning - chipset sales are expected to hit 41.3 million units this year, almost double 2002's total, 22.5 million - oversupply is driving down prices, and thus revenues. According to TechKnowledge numbers, revenues from the above sales will fall from 2002's $368.7 million to $340.2 million this year. In other words, an 84 per cent increase in shipments is yielding an eight per cent decline in revenue.

The price war is being driven by the entry of new chip makers, primarily in Taiwan. Acer Labs and SiS have begun sampling 802.11b chipsets, while VIA's networking chip subsidiary will put its own product into mass production in July. Almost all of the newcomers are looking to compete on price. The established players are being forced to do the same.

The need to maintain sales once faster, compatible and at last genuinely standard 802.11g parts come on stream is likely to keep prices down. TechKnowledge reckons 802.11g chips will hit an average $9.68 by the end of the year, just over half the $18 they commanded last year.

Countering the price decline is the fact that many 802.11b chipset vendors buy third-party radio transceivers to connect to their own MAC chips - the parts that handle the network protocols. A limited number of RF chip makers is keeping prices more stable, but again, a number of Taiwanese vendors are believed to be getting reading to enter that market and will drive down the price of RF chips and thus the cost of 802.11b chipsets as a whole.

That, say DigiTimes' sources, will push chipset prices below $4 during Q4. So come Q1 2004, we reckon they'll be giving them away. ®

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