The price of 802.11b (11-Mbit/s over 2.4Ghz) wireless LAN chipsets will drop to around $8 by the end of this year and could even fall below $5 as 2004 looms, according to Forward Concepts Co. analyst Will Strauss.

802.11b chipsets, used in PCMCIA cards and mobile devices, currently cost between $12 and $15 each. However, Strauss sees two factors that will drive down the cost of this silicon: the introduction of 802.11b chipsets that can be used in cellphones and the entrance of more aggressive Taiwanese chipmakers onto the market.

Strauss notes chipmakers like Texas Instruments Inc. (NYSE: TXN) are preparing 802.11b chipsets that can be used in cellular phones (see Moto Taps TI for WLAN VOIP). He expects that this will mean an increase in volume shipments, particularly as vendors ramp up production in 2004.

"TI told me that wireless LAN chipsets would be cheaper than Bluetooth by the end of this year," says Strauss. The price for Bluetooth chipsets is currently around the $5 mark (see CSR Seasons Its Chips for more on Bluetooth pricing).

The other element that could force wireless LAN chipset prices to fall even faster than they have been is the entry of Taiwanese companies like Realtek Semiconductor Corp. into the 802.11 market. Such competitors are aggressively cutting margins on their chipsets.

"I've heard they're really bombing the prices," says Strauss, who adds that there are rumors that Realtek will have an 802.11b chipset costing just $4 a pop out by the end of the year.

These are no doubt some of the issues that made market leader Intersil Corp. (Nasdaq: ISIL) decide to exit the wireless LAN chipset business this week to concentrate on the greener pastures of "pure analog" designs (see Intersil Exits WLAN). Strauss says that that Intersil started the year selling 802.11b chipsets at $29 each and now blows 'em out for $15.

— Dan Jones, Senior Editor, Unstrung