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Texas Fuels Price War

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3/27/2003
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The proliferation of 802.11b components coupled with aggressive tactics by silicon suppliers is fueling "a price war in the 802.11 market," according to a research note from Lehman Brothers.

Citing evidence from an unnamed Taiwanese electronics manufacturer, analysts at the investment bank say 802.11b (11-Mbit/s over 2.4GHz) product prices are "not trending down by the quarter or month, but by the week."

One of the reasons for this is increasingly lower component prices, with the manufacturer naming Texas Instruments Inc. (NYSE: TXN) as a "quite aggressive" player.

TI announced its low-power integrated single-chip 802.11b product (the snappily named TNETW1100B) last September (see TI Intros WLAN Processor), and it became available in bulk in January this year.

TI spokeswoman Marisa Speziale says the price of the chip is about the industry average, at just less than $10 per unit in bulk orders, and that the total bill of materials (BOM), for all the elements a manufacturer would need to make a product such as an access card for a PC, is just under $20.

"That's the price that has really dropped in the past year, the BOM," notes Speziale, "Before we entered the market it was $35 to $40 on average. We think our BOM is cheaper than some other suppliers, and it is dropping all the time as more Taiwanese manufacturers come into the 802.11b market."

She says that, while the margins might be dropping, the volumes are growing, allowing the major bulk suppliers such as TI to be able to make money from the business.

The Lehman research note also states that, according to its Taiwanese source, TI claims to have 802.11a (54-Mbit/s over 5GHz) and 802.11g (54-Mbit/s over 2.4GHz) products available now. Speziale says its 802.11a/b/g product (the TNETW1130), announced last November, has been sampled for TI's customers to design products, but that the chip giant will not begin commercial production until the Institute of Electrical and Electronics Engineers Inc. (IEEE) decides on a final standard specification.

This should happen in May, she says, when the .g working group is expected to complete its work. If that happens, then the IEEE's senior standards committee would "rubber stamp" the standard at its June meeting.

"We have been waiting for the final standard before going into full production, as the specifications for 802.11g have already changed twice this year, and we don't want to deliver a product to our customers that is not standards-compliant," says the TI spokeswoman.

Other silicon firms have not been as cautious (see Agere, Broadcom Blitz 802.11g and Marvell Joins 802.11g Throng), and Lehman's sources indicate that "volumes for 802.11g will ramp very quickly in the next few months, with total volumes exceeding all volumes of 802.11a products made to date."

— Ray Le Maistre, European Editor, Unstrung

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