The SOHO/consumer WLAN equipment market is becoming an increasingly difficult environment in which to compete. While shipment volumes have increased strongly since Apple first launched its AirPort line of 802.11b-compliant consumer WLAN gear in 2000, prices have eroded sharply over the past several years, and In-Stat believes that few vendors are making much money in this market segment at present. In 2004, the top three vendors by market share were Cisco's Linksys consumer products division, with roughly a third of AP unit shipments (including wireless routers and wireless Residential Gateways), D-Link at about a fifth and Netgear at a little over 15%. The top three vendors represented two-thirds of AP unit shipments in the SOHO/consumer WLAN market. Other key vendors included Apple, Belkin, Buffalo Technology, and SMC.
We still expect shipment volumes to increase strongly over the forecast period, driven both by growing broadband adoption as well as increasing use of home networks. Importantly, WLAN equipment will increasingly be used to network consumer electronics devices as well as VoIP communications. Several SOHO/consumer WLAN equipment vendors have introduced audio and multimedia WLAN media adapters, including Linksys (e.g. Wireless-G Media Center Extender), D-Link (e.g. MediaLounge DSM-320 Wireless Media Player), Netgear (e.g. Wireless Digital Media Player), Apple (the AirPort Express includes audio connectors), Buffalo Technology (e.g. LinkTheater High Definition Wireless Media Player) and SMC (e.g. EZ-Stream Universal Wireless Multimedia Receiver). Likewise, we expect that dual-mode WLAN/cellular telephony will gain significant traction in the consumer market starting in 2007.
A key market shift is the transition from the 802.11g air standard to MIMO-based products. In 2004, 802.11b and 802.11g effectively switched places, in terms of percentage of total market shipments, with 802.11b falling from 63% of total SOHO/consumer AP shipments in 2003 to only 30% in 2004. Likewise, 802.11g shipments increased from 34% in 2003 to 69% in 2004. However, unlike with the enterprise WLAN market, we do not believe that 802.11a/g is gaining traction in the SOHO/consumer WLAN market, nor will it become the logical successor to 802.11g. Instead, consumers appear to be responding to the range extension benefits of MIMO-based "pre-802.11n" products. We expect that while 802.11a/g is seeing some renewed interest for its clean 5 GHz spectrum for multimedia, the market will essentially skip 802.11a/g in favor of MIMO/802.11n. When the 802.11n standard is finalized in 2006, it will not only include the range and speed enhancements seen in today's MIMO products from the likes of Belkin, Linksys, Netgear, and D-Link, but will also utilize both the 2.4 GHz and 5 GHz spectrum, thus providing the same clean spectrum that is causing some renewed uptake of 802.11a/g. Key problems with the market adoption of 802.11a/g have been poor marketing/messaging by vendors, confusion about 802.11a/g benefits on the part of consumers, and the stubbornly high price premium for 802.11a/g equipment compared to 802.11g.
This Information Alert is drawn from In-Stat's Wireless LAN research.