Abstract

WLAN Market Still in Early Stages of Expansion

The global WLAN industry had experienced rapid shipment growth in 2003. In the first quarter of 2004, with retail market entering its slack season and notebook PC shipments falling off, WLAN shipment fell slightly compared to the fourth quarter of 2003. Whether the WLAN industry will be able to maintain high growth has become a major topic of discussion.

Looking at the main growth driver for the WLAN industry, at present desktop and notebook PC vendors constitute the main source of demand. Although Centrino platform share of total notebook PC shipments is continuing to rise, stimulating demand for WLAN NIC modules, most of the orders for these modules are going to Intel rather than to Taiwanese makers. Add-on WLAN NIC shipment is continuing to grow, but is quickly catching up to the notebook PC installation base, leaving only limited room for further growth in the add-on WLAN NIC market.

With the digital home concept gaining popularity in 2004, manufacturers have been seeking ways to integrate WLAN interface between different types of consumer electronics, such as DVD, STB (Set Top Box), PDP TV (Plasma Display Panel TV), and LCD TV (Liquid Crystal Display TV). The expectation is to use WLAN to transmit video content; WLAN makers anticipate that these types of devices will become an important new growth driver for the industry.

However, products such as DVD players, STB, and TVs are basically display-related devices; the key factor in their development is video displays such as PDP and LCD TV. However, global shipment of PDP and LCD TV remains low; the forecast for LCD TV in 2004 is approximately 8.3 million units. Therefore, in terms of market scale these products are still in the early stages of their product lifecycle. With video display, image quality must be high. To be successful, WLAN transmission would need to be able to provide image quality on par with that of wired transmission. At present, WLAN still suffers from interference problems. Another problem is that most households possess electrical appliances produced by several different vendors; the WLAN interface would need to guarantee not only basic interoperability but also first-rate image transmission quality. There are thus significant problems remaining to be overcome before home appliances can become an important growth driver of the WLAN industry.

Another important new product forming part of the digital home boom is broadband network devices. There is a growing trend for DSL (Digital Subscriber Line) and cable modems to integrate WLAN interface. Taiwanese companies account for approximately 70% of global DSL CPE (Customer Premise Equipment) shipments. In the first quarter of 2004, the Taiwanese DSL industry had total shipment of 7.9 million units; share held by wireless ADSL (Asymmetrical Digital Subscriber Line) products rose from 2.0% in the second quarter of 2003 to 14.6% in the first quarter of 2004. Data transmission products thus appear to have considerable growth potential for the Taiwanese WLAN industry.

DSL and cable modem both function as a transmission gateway linking home to the outside world; both have the potential to develop into home gateways. WLAN could help DSL and cable modems expand the scope of the service they provide to the daily routine. If this can be achieved, then DSL and cable modem would also become important growth drivers for the WLAN industry.

The range of growth drivers for the WLAN industry is thus expanding from notebook PC production to include broadband network products. Whether this expansion proceeds smoothly will depend on whether the design of WLAN devices is altered to focus on data transmission. If WLAN is to be used for both voice and video transmission, then the key factors will include the evolution of the 802.11e QoS (Quality of Service) standard, the development of the end market, and new application services.

Appendix

Research Scope

This report covers major companies manufacturing mobile phones in China. Output from companies inclusive of domestic makers, foreign direct investment, and joint ventures that manufacture handsets within China for domestic sale or export are thus contained in the statistics presented herein. Shipment statistics are exclusive of digitally enhanced cordless telephones such as PHS.

Definitions

Business Types

OEM

The OEM (Original Equipment Manufacturing) business model entails carrying out product manufacturing or assembly according to specifications supplied by the customer. The OEM business model emphasizes production efficiency; thus, in order to lower costs, customers outsource manufacturing to OEM providers. This cooperation forms a division of labor among design, manufacturing, and sales.

ODM

The ODM  (Original Design Manufacturing) business model entails undertaking product design and manufacturing, but not direct retail sales or brand promotion. ODM providers either collaborate with customers on product specifications or independently design products according to customer specifications; the ODM provider then receives manufacturing orders upon customer approval. The ODM model links the sales capabilities of the ODM customer and the design and manufacturing capabilities of the ODM provider, developing a cooperative division of labor throughout the product's value chain.

Product Types

NIC

NIC refers to a printed circuit board used to connect a PC, server, or workstation to a LAN. The NIC works with computer operating system and network software to act as the interface between the LAN and the bus of the device. The NIC segments transmit messages into packet formats specified by the LAN protocol. Upon receiving data, the NIC reassembles the packets so that the computer receives the full message.

NIC included in this report are exclusively the stand-alone form factor. LOM (LAN on Motherboard) or LOC (LAN on Chipset) form factors do not fall within the scope of this report.

Switch

A switch receives and temporarily stores incoming packets to examine link-layer information such as source and destination MAC addresses. The switch decides whether and to which port the packet needs to be forwarded. A switch transfers data based on the destination addresses of individual packets. Unlike hubs, switches divide the network into segments that operate without interference from traffic to any of the other segments. Because multiple parallel connections are supported, bandwidth contention is eliminated and simultaneous transmissions take place, increasing network performance.

WLAN NIC

WLAN function as a data communications system that provides wireless peer-to-peer and point-to-point connectivity, usually within a building. In place of twisted-pair or coaxial wires or optical fiber used in LANs, WLAN transmit and receive data over electromagnetic waves over ISM (Industry, Scientific, Medical) bands between 2.4GHz or 5.8GHz.

WLAN NIC refers to a PCB (Printed Circuit Board) that is attached or embedded into a PC or mobile device. A WLAN NIC provides device to device or device to WLAN AP data communications on a specific frequency or radio band.

WLAN AP

A WLAN AP connects a wired LAN to one or many WLAN devices, or acts as a bridge between two WLAN devices. Wireless Access points typically incorporate an Ethernet port and radio communications capability.

Routers

Routers control network flow by determining the best routing for data transmission between a transmitter and a receiver. Routers are typically controlled by software and are programmed to provide the most inexpensive, fastest, or least busy of all available routes. Routers operate at layer 3 of the ISO-OSI (International Standard Organization's Open System Interconnect) model. Routers can be further divided by the number and type of network protocols they can support and by the number of ports available for protocol routing.

SOHO routers are targeted for individual users or small and medium enterprises. They are primarily used for network packet routing for network traffic control products such as print servers, network encryption, firewalls, and destination addresses. SOHO routers are alternatively referred to as Internet gateway, Internet server, or IP (Internet Protocol) sharing router.

Glossary of Terms