Frost & Sullivan’s 2003 Bluetooth Market Update

On the Threshold Of Maturity, Bluetooth Market Comes Into Its Own

Riding a rollercoaster hype curve and struggling to resolve the many technical challenges presented by such an ambitious vision, Bluetooth has come a long way from being a simple cable replacement technology unveiled in 1998.

Bluetooth has hit a major milestone in its evolution as the technology enters the maturity stage of its lifecycle. A stable specification and installed base that runs into millions of units is proof that it has been a success. Even critics would be hard-pressed to name any other wireless communications technology that managed to achieve the volumes and diversity of deployment of Bluetooth in just six years.

The specifications of Bluetooth have reached a stage where interoperability between devices is seldom an issue, where interference with other radio technologies is a limited and increasingly disappearing concern and where adoption into new applications is no longer a daunting challenge.

The commitment of the Bluetooth community to the ongoing development of standards is ensuring that it will continue to be relevant as wireless communications moves into the future.

A new study by Frost & Sullivan believes that the spectacular growth in the semiconductor sector, a hotbed of Bluetooth development, bodes well for the continued buoyancy characterising the overall marketplace. The year 2001 saw shipments of just under 10 million chipset solutions, while annual annual shipments had more than tripled to around 34 million units by 2002.

In 2003, Frost & Sullivan expects that shipments will at least double, with a conservative estimate of over 70 million units. If the industry ramps up production in the second half of the year, this value could be significantly higher.

However, it has not all been plain sailing for companies operating in the semiconductor and subsystems space (including silicon vendors, software developers, intellectual property, modules and design houses). ?Tough economic conditions and the resource demands of a challenging technology have forced a consolidation of the market. Developers no longer jump on this bandwagon, they jump off it when they realise there is no easy money to be made,? reports Frost & Sullivan Consultant Carles Ferreiro.

Clearly identified market segments such as cellular phones and PC based applications offer substantial market potential for now and the future, whilst emerging application areas such as industrial and automotive applications will grow in importance and volume as time goes by. There are no clear competitors to Bluetooth in the personal area networking space, and while there may be other new technologies on the fringes of its range, none have its scope, volume or maturity.

The Bluetooth market has reached a stage of maturity at which commercial realities must now be addressed by developers. Whereas once Bluetooth was hailed for its get-rich-quick potential by start-ups, only those companies with a sound business plan and a clear value proposition are equipped for survival.

For many of the smaller, early developers of the technology, whether hardware or software centric, there was a clear belief that large returns could be achieved for modest investment and some who executed their exit strategies early found this to be the case, Mr Ferreiro explains.

For the remainder who found their trade acquisition objectives or initial public offering strategies limited by the slump in the technology sector and general global economic slowdown, the challenge has been to transform from entrepreneurs to stable businesses, he continues.

Even some of the larger initial Bluetooth players have found the returns achievable from Bluetooth to be too limited to justify continued significant involvement. Companies such as Avaya, Intel and Motorola have all scaled back their initial interest as the technology changed from being the world changing technological advancement it was heralded as to a more realistic breakthrough in personal communications and networking.

Most major developers, such as Cambridge Silicon Radio, based their success on technological innovation and a strong development support for customers. But as those customers in the major application areas become more comfortable with development, it is price that will emerge as the determining factor. Supporting customers will always be important, specifically in emerging markets, but as all developers reach comparable levels of functionality, it will be increasingly hard to differentiate based upon issues of specification.

Over the next few years, Frost & Sullivan expects to see a further streamlining of the component end of the Bluetooth market, and semiconductor developers, protocol software developers and intellectual property developers are already feeling the contraction. The growth opportunity lies in emerging applications, but only those able to demonstrate competence in supporting client development will win.

The long-term success of those companies in the Bluetooth semiconductor space, including software and intellectual property developers, will be based upon their abilities to identify the most appropriate application segments to target and retain customers in these areas. Developers need to be realistic about the segments that they can ultimately thrive in and carefully develop strategies and support programmes to reinforce this, the study concludes.

Frost & Sullivan, an international growth consultancy, has been supporting clients’ expansion for more than four decades. Our market expertise covers a broad spectrum of industries, while our portfolio of advisory competencies include custom strategic consulting, market intelligence and management training. Our mission is to forge partnerships with our clients’ management teams to deliver market insights and to create value and drive growth through innovative approaches. Frost & Sullivan’s network of consultants, industry experts, corporate trainers and support staff, spans the globe with offices in every major country.

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