Taiwan's broadband network industry took off in 1999 and growth peaked in 2002. The growth rate for the number of broadband subscribers worldwide has started to slow in 2003, thereby slowing the growth of Taiwan's broadband network industry. Prices are pushed lower as broadband network technology becomes standardized, reducing the level of differentiation between manufacturers' products. Shipment volume will likely continue to grow, but shipment value will likely fall, along with companies' profit margins. Therefore, manufacturers are seeking to diversify and to achieve a higher level of functionality integration: router, WLAN, and VoIP functions are being integrated into ADSL modems, while WLAN and VoIP functions are being added to cable modems to stall the decline in prices. However, while demand for integrated devices has gradually increased, operators in emerging markets such as China have been using large tenders to push purchase prices downwards, and operators in other markets are now starting to follow suit. In response, Taiwanese manufacturers are working to develop direct sales channels, collaborating with system integrators in regional markets, and building their brands. At the same time, these manufacturers have outsourced or moved production to China to fend off the pressure of rapidly decreasing profit.
The point at which the broadband industry has arrived is analogous to the earlier transition from narrowband devices to xDSL and cable modems, which was provoked by slow market growth and falling prices of mainstream devices. Similarly, the broadband industry has evolved to a mature stage, motivating manufacturers to aggressively seek out new opportunities for growth. At the same time, the percentage of households using WLAN is on the rise, causing growth in the home network market to accelerate and drawing many WAN manufacturers to the home networking market.
The two main trends in demand for network applications in the home user market at present are the growing demand for IP sharing, and an increase in demand for multimedia transmission. The demand for IP sharing can already be met by WLAN and ADSL routers; many WAN and LAN manufacturers are fighting for a share of this market. Meanwhile, network, PC, and home appliance vendors are very interested in tapping the potential of the emerging multimedia transmission market. Hence, besides keeping an eye on new developments in home network Internet access technology such as HomePlug and HomePNA, WAN manufacturers will also need to carefully consider the extendibility of their existing technologies to meet demand for product integration. For example, WAN manufacturers could focus on the development of home gateway and residential gateway products that integrate broadband Internet access, router,and switch functions. In the future, as the home user broadband penetration rate continues to rise, demand for multimedia and interactive products will increase steadily, and multimedia devices will evolve to integrate network functionality. WAN manufacturers will thus need to carefully evaluate expansion from network products into multimedia devices, such as media adapters and media centers.
Appendix
Research Scope
For the purposes of this report, WAN (Wide Area Network) refers to a computer network device that spans a large geographic area, such as a state, province or country. A WAN may be composed entirely of proprietary structures, however, only standardized, Internet related computer network devices are included in this report. Furthermore, this analysis focuses mainly on CPE (Customer Premises Equipment).
While a handful of Taiwanese companies have begun developing central office equipment such as DSLAM (Digital Subscriber Line Access Multiplexor) and CMTS (Cable Modem Terminal System), most Taiwanese manufacturers have not moved into central office WAN equipment. This is partly due to the higher level of technology required for central office equipment, creating an entry barrier for Taiwanese makers. Taiwanese manufacturers additionally suffer from low brand visibility and lack of long-term experience in collaborating with operators abroad and MSOs (Multiple System Operators). At present, central office equipments are not the main focus of Taiwanese WAN industry development because they account for only a very small percentage of the industry's total shipment value. They have therefore been excluded from this report.
This report covers all Taiwanese WAN manufacturers whose products are sold in Taiwan or overseas. Motorola's production facility in Taiwan is thus included in the statistics.
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.
OEM production for WAN includes shipments in both PCB (Printed Circuit Board) form and bundled with desktop and notebook PCs. Manufacturing undertaken for leading international vendors is also included.
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.
Products
By transmission media, WAN can be separated into three major product categories: analog modem, xDSL, and cable modem. Other WAN product categories, such as ISDN (Integrated Service Digital Network), have been omitted, either because shipment value is very low or because these products are in decline.
Analog Modem
An analog modem is a device used to connect two digital devices through a telephone network. The maximum rate of data transfer is 56Kbps.
xDSL
xDSL (Digital Subscriber Line) is a collection of technologies that provide high bandwidth over existing copper phone lines. xDSL is available in a number of variations, such as ADSL (Asynchronous Digital Subscriber Line), SDSL (Symmetric Digital Subscriber Line), HDSL (High Bit-rate Digital Subscriber Line), G.shdsl (Symmetric High Bit Rate Subscriber Line) , and VDSL (Very High Bit-rate Digital Subscriber Line). At present, ADSL is the mainstream xDSL technology, which supports both voice and data services. ADSL provides server approximately 50 times fast than analog or ISDN dial up access.
Shipment Destinations
''Asia Pacific'' does not include Japan or China, but includes Australia and New Zealand. Russia is included in ''Europe.''
Form Factor
Cable Modem
Cable modems are devices that operate over CATV RG-58 coaxial cables. By hooking up to PC and CATV systems, cable modems operate with a shared bandwidth, ring-type network architecture. TCable modem performance can vary due to the utilization of the shared cable line in the surrounding neighborhood; however, 500 Kbps is the typical data rate.
CMTS
A CMTS (Cable Modem Termination System) is a cable modem head end device that communicates through television channels with cable modems located in subscriber homes, creating a virtual LAN (Local Area Network) connection. The modem transfers IP packets from the Internet into MPEG frames and transmits them to subscriber cable modems via an RF (Radio Frequency) signal. The reverse process is then performed for signals issued by the subscriber modem.
DSLAM
A DSLAM (DSL Access Multiplexer) is a central office device for ADSL service that intermixes voice traffic and DSL traffic onto a customer's DSL line. The device also separates incoming phone and data signals and directs them onto the appropriate carrier's network.
IAD
An IAD (Integrated Access Device) is a xDSL modem integrated with voice function. Two types of technology are applied. One is called channellized VoDSL, which utilizes voice over ATM technology. The other is VoIP based VoDSL, which utilizes voice over IP technology.
MTA
An MTA (Multimedia Terminal Adapter) is a cable modem integrated with voice function. This device follows CableLabs' PacketCable standard and utilizes VoIP technology.