- Taiwanese SOHO router annual shipment volume is forecasted to reach approximately 5.2 million units by the end of 2002, increasing 280% from 2001 and accounting for over 68% of worldwide volume. The diversification of networking applications beyond simple data transmission is continuing to drive global demand for such networking equipment that recognizes and processes different packets of data. Amidst this increase in demand, Taiwanese SOHO router manufactures are seeing more orders as they gain greater self-sufficiency in key components.
According to Market Intelligence Center (MIC), lower prices have also driven shipment volume growth: average selling price (ASP) of SOHO routers dropped from US$148 in 2000 to US$63 in the first half of 2002. Combined with the strong demand in the small and medium enterprise (SME) market, SOHO router shipments continued to grow despite the dot-com shakeout. Shipment volume grew 283% from the first half of 2001 to over 533,000 units while shipment value increased over 192%, reaching US$127.9 million.
With the exception of SOHO routers and WLAN products, most product sectors in the Taiwanese LAN industry saw year on year declines in the first half of 2002. The aggregate shipment value of the Taiwanese LAN industry, which includes network interface cards (NIC), hubs, switches, wireless access points, wireless NIC, and SOHO routers, dropped 3.5% compared to the peak volume achieved in first half of 2001.
However, the Taiwanese LAN manufacturers fared better than the worldwide industry. "While Taiwanese LAN makers predominantly target consumers and SMEs, customers of leading international vendors are mainly operators and large corporations, which were more heavily impacted by the economic downturn," explained Kelvin Liang, Senior Industry Analyst with MIC. "Additionally, with increasingly fierce price competition, many of these vendors are outsourcing to Taiwanese makers." Despite year on year contraction, the Taiwanese LAN industry saw 3.1% growth in shipment value compared to the second half of 2002, mainly driven by the rise in SOHO router and WLAN shipment value.
In the long term, it is expected that the Taiwanese LAN industry will experience intensifying competition from Chinese manufacturers in the value-line market. "Not only have Chinese manufacturers leveraged their economies of scale to manufacture value-line products such as 10/100 NIC, but the large domestic market will also help incubate branded manufacturing with future LAN products. Development of Chinese branded products will likely hinder Taiwanese makers' expansion into China's vast market," said Liang.
An even greater threat is the competition Taiwanese makers will face from electronics manufacturing service (EMS) providers in the high-end sector. "The relationships EMS providers have developed with international vendors are both closer and broader; they are thus better positioned to develop these high-end LAN markets," said Liang. "To counter this advantage, Taiwanese makers will need to extend their existing level of vertical integration. An expansion of key component production will help reduce the cost of materials purchasing and accelerate product upgrades," Liang added.
For more information on the Taiwanese LAN industry, please refer to the report "The Taiwanese LAN Industry, 1H 2002 and Beyond."