Home networking chip market bustling - In-Stat/Insights

Electronic News, Sept 2, 2002 by Mike Wolf

THE HOME NETWORKING MARKET IS UNDERGOing significant change. After years of trying to convince consumers they should network their homes, networking equipment and silicon vendors have discovered in 2002 that consumers are finally doing just that. The overall number of home networks worldwide is expected to jump from 10.5 million at the end of 2001 to 16.6 million in 2002 and will explode over the next five years as it reaches 77 million worldwide by 2006.

As seen in a recent survey of U.S. households by InStat/MDR, the main reason people are interested in home networking is to share a broadband connection. Nearly half of all home network users use their network for broadband sharing, and nearly four in 10 say that this is the primary reason they have a home network. But broadband sharing is not the only reason. Three out of 10 home network owners say they use their network for multiplayer gaming, and two in 10 for digital audio distribution.

As the demand to interconnect both PCs and disparate devices increases, this creates a complicated and dynamic marketplace for the devices and underlying silicon. The convergence of the different clusters in the home network (data, voice, entertainment and control) has made for an extremely fast-moving market as new types of data networking equipment are merging and connecting to networked appliances such as Web pads, networked audio players and gaming consoles. The recent announcement of bridge devices that enable Ethernet-powered products such as gaming consoles and DVRs to get on the wireless network are only just the beginning of this network convergence.

So what does this growth for home networking mean for the silicon powering all of these new devices? The home networking silicon market, which includes both the communications processor powering many of the gateway and access point devices as well as the PHY layer ICs that are generally media specific, will rise with the overall home networking tide. The overall home networking silicon market will grow from $356 million in 2002 to more than $1.4 billion in 2006. This growth will be driven by the integration of communications processors into gateway devices as well as the increased consumption of WLAN chipsets in both the gateway/access point as well as the client side of the network.

The home networking silicon market will continue to be driven by integration. At the heart of this integration will be the communication processor, which is the low end of the network processor spectrum. The communications processor market for gateway, access points and set-top boxes will increasingly integrate different functional blocks of the home network chipset. Most communications processors in this space currently integrate multiple Ethernet MACs. Over time, we will see integration of MACs from multiple network types, including the baseband/MAC portion of 802.11x WLANs. We are also seeing full gateway-on-chips emerge, as vendors are integrating not only WLAN baseband/MACs but the cable modem or DSL MAC/PHY as well. Over time, the entire digital portion of the home networking system will be integrated into one SOC as equipment vendors see this as the primary way to lower costs--a necessary development in the broader move toward pervasive connectivity.

Mike Wolf is the director of enterprise and residential communications at In-Stat/MDR. His latest report, "Chips Ahoy: Home Networking Chipsets Set Sail for a Prosperous Future, "was published in August. In-Stat/MDR is owned by Reed Business Information, the parent company of Electronic News.