The End of Startling Growth Spurts
Ever since the global broadband market took off in 1999, xDSL and cable modem have replaced analog modems as the main growth drivers for the Taiwanese WAN industry. In applying the industry lifecycle model to the Taiwanese WAN industry, in 2003, analog modem reached the decline stage, while xDSL and cable modem had both evolved to the mature stage. For the industry as a whole, the stage of rapid growth is already over. As broadband network technology becomes standardized, differences between vendors' products are becoming less significant, creating downward pressure on prices. The WAN industry is now experiencing a situation where shipment volume is continuing to rise but shipment value remains constant. Looking ahead to the future, shipment value will grow slowly, or may in fact decline. In response to this trend, WAN makers are working aggressively to stimulate demand for new generations of products, focusing on new product specifications and integration between different product categories. However, the consumer market has not been responding, and makers have been forced to resort to low-price campaigns, sacrificing profits to boost market demand.
The Negative Impact of Home Networking
With rapid growth in households using WLAN, the home network market has started to take off, attracting the interest of WAN makers. The general consensus regarding the form that home network products should take in the future is that there will be a need for media gateways, media adapters, media centers, and other types of home gateway that can provide multimedia transmission, Internet access, and storage functions. However, at present the expertise of WAN makers lies in the area of network transmission technology; their mastery of multimedia transmission and storage technologies is limited. At the same time, companies in other sectors, such as PC and PC peripheral vendors and home appliance vendors, are also competing for business opportunities in the home network market. Thus, a distinct possibility is that WAN products will be integrated into new types of home network product, becoming increasingly modularized. Such a trend would have a negative impact on ASP, and the importance of the WAN makers would gradually decline.
Establishing Product Roadmaps
Taiwanese WAN makers lack long-term product roadmaps. As a result, when product transitions take place, makers find themselves in a dilemma. Due to the manufacturing-oriented business model adopted by Taiwanese WAN makers, Taiwanese firms tend to lack experience in marketing and new product planning. As a result, they are slow to react to the needs of the changing market. The gradual emergence of the home network market will have a significant impact on the global WAN industry. Whether or not the Taiwanese WAN industry is able to advance into a new era of high growth will depend on whether Taiwanese WAN makers are able to respond promptly to the new trend, making the necessary adjustments to product development, customer relationships, and marketing.
The Potential of the Chinese Broadband Market
The Chinese xDSL market entered a period of rapid growth in 2003. By the third quarter of 2003 the number of xDSL subscribers in China had reached five million, with a total of 2.8 million new subscribers in the first three quarters of 2003. China is now second to Japan in xDSL subscribers. However, the broadband penetration rate in China is still less than 5%; given that there are approximately 250 million fixed line telephone subscribers in China, the xDSL market still offers considerable potential for growth. The huge 2.9 million line xDSL tender awarded by China Telecom in July 2003 suggests that China's operators are determined to continue developing the broadband market. It is anticipated that by the end of 2003, the number of xDSL subscribers in China will have risen to 6.3 million. In 2004, as the price of xDSL equipment continues to decline and operators continue to expand broadband service provision, the growth rate in the Chinese broadband market will further accelerate. By the end of 2004 China is expected to have over 13 million xDSL subscribers.
Appendix
Research Scope
For the purposes of this report, WAN 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.
While a handful of Taiwanese companies have begun developing central office equipment such as DSLAM 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. 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.
Definitions
Business Types
OEM
The OEM 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 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 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, SDSL (Symmetric Digital Subscriber Line), HDSL (High Bit-rate Digital Subscriber Line), G.shdsl, and VDSL. 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.
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 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.
Shipment Destinations
''Asia Pacific'' does not include Japan or China, but includes Australia and New Zealand. Russia is included in ''Europe.''
Glossary of Terms
|
ADSL |
|
Asynchronous Digital Subscriber Line |
|
BOM |
|
Bill of Materials |
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CMTS |
|
Cable Modem Terminal System |
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CO |
|
Central Office |
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CPE |
|
Customer Premises Equipment |
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CMTS |
|
Cable Modem Termination System |
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DSLAM |
|
Digital Subscriber Line Access Multiplexor |
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G.shdlsl |
|
Symmetric High Bit Rate Subscriber Line |
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HDSL |
|
High Bit-rate Digital Subscriber Line |
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IAD |
|
Integrated Access Device |
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ISDN |
|
Integrated Service Digital Network |
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LAN |
|
Local Area Network |
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MSO |
|
Multiple System Operator |
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MTA |
|
Multimedia Terminal Adapter |
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ODM |
|
Original Design Manufacturing |
|
OEM |
|
Original Equipment Manufacturing |
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PCB |
|
Printed Circuit Board |
|
POS |
|
Point-of-Sale |
|
RF |
|
Radio Frequency |
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SARS |
|
Severe Acute Respiratory Syndrome |
|
SDSL |
|
Symmetric Digital Subscriber Line |
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STB |
|
Set-Top Box |
|
USB |
|
Universal Serial Bus |
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VDSL |
|
Very High Bit-rate Digital Subscriber Line |
|
VOD |
|
Video on Demand |
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VoIP |
|
Voice over Internet Protocol |
|
WAN |
|
Wide Area Network |
|
xDSL |
|
Digital Subscriber Line |