Tech Scan

Bluetooth semiconductor market in nascent stage

Mrunmayi Atre

Though the ratification of Bluetooth 1.1 in February 2001 brought about a fresh impetus as many technical problems that dogged the 1.0 standard and its predecessors were resolved, the challenge for semiconductor developers is to move on to volume production of 1.1 chipsets as quickly as possible.

As microprocessors and computer applications have evolved to change the way in which we live and work, networking technology has kept pace and established new means of interaction. Networking technology, traditionally, has spawned around two lines systems. The first has been that of wireline technology that uses a cable for communication. The second has been wireless technology. Though each one of these technologies grew in scope and scale to match the progress made by computers, their inherent benefits were mutually exclusive. It is a challenge to transfer data over a long distance and high bandwidth using wireless technology. On the other hand, wireline technology calls for large investment in infrastructure to establish the network and at best, only provides for limited mobility.

Bluetooth is a radio frequency (RF) specification for short-range, point-to-point and point-to-multi-point voice and data transfer. Bluetooth has revolutionized the personal connectivity market by providing freedom from wired connections and linking mobile computers, mobile phones and portable handheld devices to each other and to the Internet. It has provided an opportunity for the industry to deliver wireless solutions that are ubiquitous across a broad range of devices.

Bluetooth has come a long way in 2002, from being a simple cable-replacement technology that was unveiled in 1998. Now, the standard appears to have been set and the technology has moved from the concept stage to real products that are being shipped.

Market drivers in India
The major market drivers for Bluetooth technology in developing markets such as India are:

* Anticipated proliferation of client devices
The biggest driver behind Bluetooth networking platforms is the proliferation of complementary client devices. Cellular phones and handheld computing devices such as personal digital assistants (PDAs) are experiencing strong growth, with devices penetrating consumer channels as well as traditional business and commercial user groups. Bluetooth is the most suitable technology to deliver services to these devices over short distances.

* Advances in client device technology
The nature of handheld devices such as cellular phones and handheld computers is changing to produce more converged devices that are optimized for wireless data services. Cellular phones have progressed to support basic data services such as text messaging, with more advanced services such as those provided by wireless application protocol (WAP) are becoming common.

* Adoption of wireless data services
Awareness of wireless data services is increasing with the adoption of cellular technologies such as general packet radio service (GPRS) and 3G voice and data cellular networks. This is reinforced by the increasing popularity of wireless local area networking (WLAN) solutions. Many application developers, software developers and solutions providers now realize that Bluetooth is another way to provide network services.

Major challenges facing Bluetooth
The major market challenges in the adoption of this technology are:

* Cost issues
Several years ago, Ericsson, the developer of Bluetooth, suggested that for this technology to become ubiquitous, the chip should cost $5 or less. This statement has had a psychological impact on the market, with many developers and potential developers holding this to be the aim of chip vendors. In price-sensitive Indian markets, the cost of new technology is the most critical factor.

* Interoperability
Interoperability among devices has been a long-term concern for the Bluetooth SIG, and despite the introduction of the 1.1 specification, it continues to be so. While 100 percent interoperability will never be achieved due to the physical differences among various applications, it should at least be guaranteed between closely related applications.

* Supporting customers
Development support for customers is the single biggest challenge facing the Bluetooth semiconductor market at this point. Bluetooth is a complex radio technology aimed at a number of markets that do not traditionally have expertise in this area. Silicon chip vendors, software developers and designers are addressing this problem and support services companies are forming partnerships. Alternatively, design and support services companies are targeting enterprises that directly act as outsourced R&D facilities, often providing the full product development experience.

* Interference causes clashes
Bluetooth operates in the industrial scientific and medical (ISM) 2.4GHz radio frequency band, which is becoming overcrowded. Its unlicensed status encourages a multitude of radio standards to occupy the band.

Moving to Bluetooth 1.1
The ratification of Bluetooth 1.1 in February 2001 brought about a fresh impetus because of the resolution of many technical problems that had dogged the 1.0 standard and its predecessors. The challenge for the semiconductor developers is to move to volume production of 1.1 chipsets as quickly as possible. Although most silicon chip vendors have been following the changes to the specification closely, there will still be a delay in the adoption of 1.1 specification following through to the actual availability of 1.1 chipsets. The pace of market development will depend on the speed at which manufacturers can bring 1.1 into existence.

Bluetooth market analysis by Frost & Sullivan, India
Since the last quarter of 2000, the Bluetooth environment has begun to display increased activity in the developed part of the Asia Pacific market. However, India has seen higher interest in this technology only recently. Clear advances have been made in the development of Bluetooth subsystems, leading to the first generation of shipped products. Alongside the developments in silicon, firmware and hardware, there are increasing signs of activity from software application developers. Now that the hardware at least has basic functionality, developers can look to create the usage models that will drive adoption.

The global Bluetooth semiconductor market is in the nascent stage. Market revenues were less than $80 million in 2001. However, the market is expected to ship about 6.5 million access points by 2007, generating revenues more than $992 million. The Indian consumer and the enterprise markets are yet to make a significant beginning in the adoption of Bluetooth as a networking media. The investments in Bluetooth technology in India are expected to increase only in the next three to four years.

The market for Bluetooth technology software is currently in its infancy. However, it is attracting significant attention from a range of verticals that are keen to adapt Bluetooth's functionality to their needs. The market for Bluetooth technology software has been held back by the delay in finalizing the Bluetooth specification, and the inability of subsystem developers to meet the full Bluetooth standard. Now that these issues have been almost overcome, this market should see strong growth in the next few years.

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The author is an analyst at Frost & Sullivan, India.