Bluetooth Is Finally Ready to Bite

After failing to live up to unrealistic expectations, Bluetooth appears
ready to make its mark in the wireless networking world, according to a new
study.

Research by Allied Business Intelligence (ABI), an Oyster Bay, N.Y.,
consulting firm, reports the Bluetooth market is poised
for solid growth this year, with more explosive expansion to come in the
next five years.

In 2002, ABI expects Bluetooth chipset shipments to more than triple from
last year, reaching 33.8 million. That pales in comparison to the forecast
for the market in 2007, when ABI forecasts 1.1 billion chipsets will ship
and generate $2.54 billion of revenues.

Bluetooth is a frequency-hopping scheme that allows data and voice transfer,
on the unused 2.45 GHz frequency band, at a range of about 10 meters. The
technology allows the interconnection of computers to any number of wireless
devices, including cell phones, pagers, and PDAs.

“There was a tremendous amount of unrealistic expectations,” said Navin
Sabharwal, ABI’s director or residential and networking technologies. ” When
Bluetooth was conceived, it was going to be a cable-replacement technology.
What happened is when the Bluetooth movement got going, everyone looked at
this and said we’re looking for a wireless connect solution.”

“It got distorted and people began believe the hype,” he added.

ABI pegs the growth of the cell-phone market to be key to Bluetooth’s
near-term growth, since mobile phones will account for about two-thirds of
the 27.8 million Bluetooth devices that will ship this year.

Sabharwal said growth would be helped by a number of factors, First, the
Bluetooth industry has resolved many of its interoperability issues with the
Bluetooth 1.1 specification. Second, chipset prices have begun to fall to
where many Bluetooth boosters had expected them years ago. Sabharwal
estimates chipsets will sell for about $7 this year, falling to $5 next
year, and even further as production ramps up in the following years.
Finally, handset sales have slowed, leaving demand for Bluetooth chips short
of earlier bullish projections. Sabharwal said he expects handset sales
growth to pick up shortly, although not at the blistering pace of 1998 and
1999.

In the future, ABI sees the Bluetooth device market diversifying as early as
next year, with increased shipments of PDAs, cordless headsets, and
notebooks. However, ABI cautions the Bluetooth will not be the wireless
elixir it was once billed.

“What we’re starting to see is Bluetooth can’t be everything to everybody,”
Sabharwal said, pointing to some instances where Wi-Fi or even ultra
wideband technology might work better.

The Bluetooth chipset market remains crowded with 30 manufacturers,
including Cambridge Silicon Radio, Infineon Technologies, Texas Instruments,
and Ericcson. Sabharwal said he expects that number to quickly winnow to
five or six market leaders, which will inevitably be the traditional
chipmakers.

“A lot of the guys who will fade out over the next year will be some of the
smaller startups,” he said.

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