Broadcom Ascending in WLAN?
"Broadcom will be able to pass up everybody else, coming from essentially zero in 2002," says Bob Wheeler, analyst with The Linley Group. The conclusion comes from the Linley report, "A Guide to Wireless LAN Chip Sets," a competitive comparison of 802.11 chip technologies and market-share data for 2002.
The top chip seller by revenue was and is Intersil Corp. (Nasdaq: ISIL), largely on the strength of its design wins at Cisco Systems Inc. (Nasdaq: CSCO). Intersil took up 50 percent of the 802.11 chips market in 2002, but that's going to drop. The Linley Group isn't predicting exact market shares for 2003, but Intersil and Broadcom combined will have about a 50 percent market share this year, Wheeler estimates.
We've certainly heard plenty of bragging out of Broadcom (see Agere, Broadcom Blitz 802.11g ), but is it believeable? Wheeler says the chain of events goes like this: Broadcom's quick rise was based on a bet on 802.11g, combined with technology that let the firm price-bomb the competition.
Broadcom risked running afoul of the standard by releasing g chips early. But with no real stake in 802.11 at the time, the company didn't have much to lose. Moreover, it turns out the market wasn't that picky about Institute of Electrical and Electronics Engineers Inc. (IEEE) standards. "In the SOHO [small office/home office] market, people don't care if the standard was done or not. They just see the bigger 54-megabit number," Wheeler says.
Broadcom also made the technology cheap by producing everything in silicon, rather than more expensive materials such as gallium arsenide. It also cut costs by using a host-based media access controller (MAC), meaning most of the MAC functions are executed in software on the host's CPU. Most other chip sets include a proprietary processor or the embedded microprocessors from ARM Ltd. (Nasdaq: ARMHY; London: ARM).
In a self-fulfilling argument, cheapness helped 802.11g catch on quickly, making Broadcom's bet pay off. "It's a combination of backwards compatibility with .11b and being able to hit the price point for SOHO," Wheeler says.
A side effect of the host-based MAC was that Broadcom could tweak its technology in software, making it easy to adapt its chip set as the 802.11g standard took form. That's been crucial, as Broadcom had to face early charges that 802.11b and 802.11g didn't play well together (see Interop Woes Smite 802.11g). Broadcom officials say those problems are licked, but the market's still cluttered with pre-standard g products that could theoretically cause trouble (see 'G' Spec Nears Completion ).
A couple of factors could throw a monkey wrench into the market-share predictions. Broadcom and Intersil could be pitted against one another soon thanks to the Cisco acquisition of Linksys Group Inc. (see Cisco Buying Linksys for $500M and Cisco Completes Linksys Acquisition), because Cisco uses Intersil chips and Linksys uses Broadcom's. "If Cisco decides to consolidate vendors, that could have an effect," Wheeler says. "It could go either way."
Another wild card is the potential rise of Intel Corp. (Nasdaq: INTC). The company sells modules rather than chips, but its in-house chip production will be substantial enough to put a dent in the market: It'll be Intel and Broadcom vying for the top two spots in 2004, Wheeler says.
For now, Intel doesn't have a complete 802.11 chip set. It's managed to produce the MAC but uses radios from Philips Semiconductors. Intel officials haven't talked much about 802.11g, but they've said they're developing an 802.11a/b chip set made entirely with Intel silicon.
— Craig Matsumoto, Senior Editor, Light Reading