A close look at the Bluetooth market
12/01/2002
After an unpromising performance in 2001, the Bluetooth market has improved in 2002. The steady ramp in Bluetooth chipset shipments demonstrates that, at the right price, most system vendors are interested in integrating Bluetooth functionality for short-range wireless links using spread spectrum techniques.
Last year's hype about Bluetooth capability has been replaced by a more pragmatic perspective on the technology's strengths and limitations. Several other problems have also been alleviated: The Bluetooth 1.1 specification is fairly stable, interoperability issues are fewer, and aggressively priced chipsets are now available from several vendors.
Chip trends
On the silicon front, the debate about which process technology is superior continues. Players such as Cambridge Silicon Radio (CSR), Broadcom, and Zeevo are pushing CMOS as the best technology cost-wise, especially as it allows for a single-chip solution. Other players are still using SiGe and BiCMOS designs.
Allied Business Intelligence (ABI) sees other interesting trends. The first is a fork in silicon vendors' roadmaps — one path for a single-chip radio and a second for a single-chip chipset, which includes the radio and baseband.
The single-chip chipset makes greatest sense for implementations where the Bluetooth module is disconnected from the host processor of the device. It is the lowest-cost solution, while it retains the flexibility to separate the Bluetooth components from the other components in the system.
 Figure 1. Worldwide average selling price for complete Bluetooth chipsets, 2000–2007. |
null
As Bluetooth becomes a standard feature in certain devices, however, there are also cost savings in further integration. In some applications, the Bluetooth radio is coupled with the host processor of the device, which must integrate the Bluetooth core.
Both Qualcomm and Texas Instruments (TI), the dominant cell phone baseband providers, have begun to make their products Bluetooth-capable, so that a mobile handset vendor need only buy the Bluetooth radio, not the baseband. Silicon Wave and Broadcom have unveiled versions of their radios compatible with GSM and CDMA basebands found in handsets.
Another trend we see is Bluetooth IC vendors moving away from the "one-size-fits-all" approach, having begun to offer chipsets optimized for different applications and devices. The underlying objective is to reduce cost and time-to-market.
Chipset pricing
For much of 2001, the price of Bluetooth chipsets was higher than the promised $5 target. ABI estimates that the average chipset sold was closer to $11.50, with module prices at about the $20 mark.
1H02 witnessed the transition from first-generation to second-generation Bluetooth solutions. Chipset costs were solidly sub-$10 and module costs sub-$15. At the time this article was written, Bluetooth chipsets were priced at sub-$7, modules at sub-$10.
 Figure 2. World market for Bluetooth chipset shipments, 2001–2007. |
null
The dramatic fall in chipset prices in the absence of a more significant ramp-up in volume (Fig. 1) has been the most interesting phenomenon in the market. While lower-cost designs are a key catalyst, the fall in price is also due to players lowering gross margins under pressure from increasing competition.
Although $5 chipsets and even sub-$5 chipsets had been announced by 3Q02, ABI does not see this as a viable price point until 2003 for two reasons. These chipsets are not likely to be in volume production until early 2004, and in order to get these prices, equipment vendors will need to guarantee millions of units in volume.
Fierce competition, reduced process geometries, and continued chip innovation will eventually drive average selling prices to sub-$3 price points.
Chipset shipments
The Bluetooth chipset market shows solid growth in 2002 as it continues to make inroads into embedded applications (Fig. 2). In 2001, despite all the negative publicity, there were 11.2 million chipsets shipped, which although below market expectations, was greater than the number of 802.11b chipsets. Ericsson's integration of Bluetooth into its mobile handset models was an important driver.
In 2002, ABI estimates that Bluetooth chipset shipments will increase roughly three-fold to 33.8 million, driven mainly by mobile handset and cordless headset markets. The volume ramp in 2003 should show a four-fold growth as Bluetooth becomes a standard feature in high-end cell phones and makes progress in other market segments, particularly notebooks and PDAs.
Who are the key chip players?
By ABI's count, there are more than 30 companies designing Bluetooth chips or licensing silicon IP. ABI also estimates that six players accounted for all but 21% of Bluetooth chips shipped in 2001: Ericsson Microelectronics (now being acquired by Infineon); CSR; Philips Semiconductors; Infineon; TI; and Silicon Wave. A number of additional players emerging in 2002 — Broadcom, Microtune, Motorola, National Semiconductor, and Zeevo — will increase the level of competition.
In the long run, ABI expects considerable consolidation in the market, a trend already begun with the exit of some early start-ups. When Infineon acquires Ericsson Microelectronics and STMicroelectronics acquires Alcatel Microelectronics, two additional players will be eliminated.
Most Bluetooth IC vendors follow a fabless model, outsourcing the production of chips to independent fabs such as Chartered Semiconductor, TSMC, and UMC. The ability of these fabs to expand rf CMOS processes has been instrumental in developing low-cost Bluetooth silicon.
Larger, established semiconductor houses like Infineon, Philips Semiconductors, TI, and National Semiconductor, however, are using or plan to use in-house foundries. This is a potential advantage, as it may give them flexibility to respond to pricing trends.
Bluetooth and 802.11
Bluetooth is a short-range wireless connectivity technology based on the concept of a personal area network. Few people have seriously argued that it could support a wireless local area network (LAN), since wireless LAN technologies like 802.11b have higher data rates and can transmit over longer distances (typically a few hundred feet). In addition, wireless LAN technologies support complex enterprise features like roaming and handover.
Some observers have argued that with declining IC costs, wireless LANs will kill Bluetooth.
Although there is overlap between the two technologies, Bluetooth does have advantages over 802.11b. Bluetooth chipsets are available for about half the cost of 802.11b solutions. More important, Bluetooth chipsets offer lower power consumption and smaller form factors. These three key differentiators — cost, power consumption, and form factor — mean that Bluetooth is superior to 802.11b in certain applications.
Several device vendors are willing to implement both 802.11b and Bluetooth, providing the incremental cost is not significantly higher than an 802.11b-only solution. The biggest obstacle outside of module implementation has been how to allow both technologies, because Bluetooth can cause significant interference to 802.11b operation, although Bluetooth itself is less susceptible to 802.11b interference. Work being done in this area by Intersil-Silicon Wave and Mobilian will be key in allowing both technologies to coexist in a single device.
Solutions to the coexistence problem will take a number of different forms. Most important, the Bluetooth ACM.SIG and the IEEE are working on adaptive frequency hopping, which means that Bluetooth solutions will be able to sense the presence of 802.11b channels in operation and will modify their hop pattern to operate in the portion of the spectrum not occupied by 802.11b.
In any case, many industry participants are hopeful that 802.11a, the next-generation wireless LAN operating in the 5GHz band, will be rapidly adopted. If this happens, wireless LANs can migrate into the 5GHz spectrum, leaving the 2.4GHz band for Bluetooth.
Navin Sabharwal is director of residential and networking technologies at Allied Business Intelligence Inc. (ABI), a technology research think tank that publishes information on the wireless, broadband, electronics, networking, and energy industries. This article is based on his ABI report "Bluetooth: The Global Outlook for Bluetooth Component and Equipment Markets." For more information, contact Allied Business Intelligence Inc., 69 Hamilton Ave., Oyster Bay, NY 11771; ph 516/624-3113, fax 516/624-3115, www.alliedworld.com.Navin Sabharwal, Allied Business Intelligence Inc., Oyster Bay, NY