WLAN Market Poised for Double-Digit Growth

Dataquest Inc., a unit of Gartner, Inc. is predicting that the wireless local area network (WLAN) industry will experience 73 percent growth in 2002, with revenue increasing 26 percent. The surge is expected to continue through 2003, with revenue reaching $2.8 billion – up from $2.1 billion in 2002.

Worldwide wireless LAN shipments will total 26.5 million units in 2003, up from 15.5 million units in 2002 and the market is expected to continue healthy growth through 2007.

Similarly, In-Stat/MDR is forecasting business WLAN unit volumes to grow by almost 60 percent in 2002. Total end-use revenues, which increased by 92 percent in 2001, are expected to only jump a mere 7 percent, due to falling prices for 802.11b equipment and the lower-than-expected prices of 802.11a products debuting on the market.

Gartner indicates that North America is the largest region for WLAN shipments as it is projected to account for 63 percent of shipments in 2002. But other regions will begin to account for a larger portion of the overall market.

“Regulatory restrictions in Europe have delayed adoption, but this issue is now being resolved,” said Andy Rolfe, principal analyst for Gartner’s telecommunications and networking group.

Asia Is Fast Catching Up
Rolfe added that there is also strong demand for mobile computing devices in Asia-Pacific, particularly in Japan. “This will result in the strongest WLAN growth being outside North America and by 2007, North America is projected to account for 40 percent of shipments while Asia-Pacific and EMEA [Europe, Middle East, Africa] should have approximately 30 percent of the market.”

In-Stat/MDR reports that Asia Pacific remained a high-growth market for wireless LAN growth, with Taiwan, South Korea and Hong Kong coming on very strong. Also, Japan and South Korea noticeably broke out of the pack in 2001 and early 2002, and is expected to grab almost 25 percent of business WLAN unit shipments in 2002, surpassing EMEA.

“Although WLAN was a little slower to take off in Asia Pacific, we are seeing strong growth here and the region is catching up fast,” Robin Simpson, Gartner’s mobile and wireless analyst, further elaborated.

“Asia Pacific shipments will rise from 3.4 million units in 2002 to six million in 2003 and 22 million units by 2007; a compound annual growth rate (CAGR) of 50 percent. From only 1,625 hotspots in 2002, we will see Asia Pacific’s WLAN infrastructure grow to just under 38,000 hotspots by 2007,” Simpson said.

More than 40 percent of these hotspots will be located in cafes, 32 percent will be community based (parks, libraries and public buildings), 10 percent in hotels, and less than 0.2 percent in airports.

“In Hong Kong for instance, the build-out of WLAN infrastructure is aimed at both business and residential users. The latest housing estate to go on sale here has WLAN broadband service built right in and it’s being driven by large telcos and Internet service providers,” said Simpson.

Key Drivers In Worldwide Market
“The initial strong growth in the WLAN equipment market is being driven by the mobile data connectivity needs of professional portable PC users,” said Rolfe. “The increase in WLAN-enabled mobile PCs and PDAs will drive demand for WLAN access in a variety of locations to support mobile access to business applications. These include homes for teleworkers and ‘day extenders’, public spaces or ‘hotspots’, and enterprise premises. As WLAN equipment prices continue to fall and speed increases, wireless solutions will become a viable alternative to wired LANs in small premises. This is because bandwidth demands are lower in small sites, and the cost of cabling for wired Ethernet is higher than in larger premises.”

Gartner forecasts the penetration of WLAN into the professional mobile PC installed base will grow from 9 percent in 2000 to almost 50 percent by the end of 2003. It is expected to surpass 90 percent by 2007.

Most WLANs are currently being purchased as an add-on PC adapter. But, in 2002, approximately 10 percent of all mobile PCs will be shipped with a WLAN included and this number will increase to 31 percent in 2004. By 2007, Gartner forecasts that 68 percent of mobile PCs shipped will include a WLAN.

“Already the top-tier mobile PC manufacturers offer portable PCs with bundled wireless adapters,” said Rolfe. “In fact, Intel recently announced its intention to incorporate WLAN capabilities into the forthcoming Banias mobile platform, which will drive WLAN integration in new mobile PCs.”

In-Stat expects the home market to continue to drive overall WLAN market growth, with total home shipments growing 20 percent, spurred on by the popularity of low-cost wireless broadband gateway products.

Surviving The Competition
Gartner says that because the industry has a great deal of potential, many vendors are trying to enter this market sector, with more than 70 vendors offering WLAN equipment in 2001.

“The market is already far too crowded and we expect to see significant failures, withdrawals and consolidation over the next two years,” said Rolfe. “By 2005, apart from mobile PC vendors offering bundled or integrated WLAN, we do not expect there to be more than six or seven significant adapter vendors. There will be a larger number of infrastructure vendors that survive, due to the greater differentiation in products.”

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