Intels Centrino Strikes Blow at WLAN Firms

Intel's entry into the wireless LAN market has pushed other WLAN providers to examine their business strategies.

Intel Corp.s Centrino mobile technology platform, which includes low-voltage Banias CPUs and the Calexico wireless chipset, has helped lift the fortunes of notebook manufacturers. But the companys entry into the wireless LAN (WLAN) market has pushed other WLAN providers, who fear that Intel will monopolize their industry, to examine their business strategies.

In South Korea, Samsung Electronics and LG-IBM are profiting handsomely from the new Intel products, while WLAN equipment makers are busy trying to calculate potential losses or profits, which largely depend on how well Intels wireless products will do.

WLAN chipset manufacturers such as Intersil or Agere and WLAN card producers including Netgear, 3COM, Samsung Electro-Mechanics, Acrowave and MMCTechnology are directly affected by Intels Centrino strategy. "In the long run, more than 80 percent of notebooks are expected to come equipped with WLAN and Centrino. It is crucial for companies to pay attention to Intels strategy because other companies might wither away as a result," commented Hwang Hyun, chief researcher at Samsung Electro-Mechanics.

Choi Ho-won, CEO of 3Com Korea, also worries: "WLAN is a new market. Obviously any businessman dreams of being the first to enter this market. But if WLAN technology becomes dominated by a single player, innovation will likely suffer." Still, the ultimate impact of Intels Centrino strategy on the WLAN industry remains to be seen.

The WLAN industry is buzzing with talk about Intels Centrino technologies, which are flagging the companys intent to become a leader in mobile and wireless technologies, which will be key technologies for the Internet, multimedia, and high-speed networking.

Intels Centrino platform has received praise for setting WLAN standards. Currently, there is no clear leader in the WLAN chipset and card industries. Competing technologies and security problems have hindered broader adoption of WLAN. Centrino beefs up WLAN security, a key concern in wireless networking, and addresses underlying technology issues such as roaming and radio frequency control. As a result, Centrino is welcomed by enterprise customers who are looking for stability, standardization, and convenient management. Some observers expect that Intels entry into the market will encourage customers to move to wireless computing environments.

Intels wireless business is likely have a major impact on the WLAN card industry, with some predicting the industrys demise. Although Intel is competing with major processor companies like Advanced Micro Computers (AMD) and Transmeta in the notebook space, it is powerful enough to impact the fortunes of WLAN card makers: Intel has offered large subsidies to notebook manufacturers and is using these subsidies as a means of advancing into the wireless area. Unit costs of WLAN chipsets have been falling recently and the advent of Intel Centrino has accelerated this trend.

Many people expect that Intels next target for its Centrino technologies will be the desktop PC space. Still, the companys current wireless strategy is focused on notebooks and Tablet PCs because of their chipset composition and Lee Kuk-Yon, the head of Intel Koreas technical team, downplays such speculation: "The core of Intels wireless strategy is the practical use of notebooks. This technology hasnt been applied to desktop PCs yet since the goal is to improve mobility, connectivity, and security of notebooks." Lee added that Centrino will offer consumers more choice, lead to broader adoption of wireless technologies, and solve security problems.

Intel has a mixed record when venturing beyond its core micro-processor business. Past efforts to enter the sound and video cards market didnt gain widespread support, leading some companies to put their hopes on survival by gaining more advanced competencies and providing better service. In the industrial market, for example, companies have spent large amounts of money replacing desktop PCs, and are eager to partner with WLAN equipment developers to reduce costs. WLAN companies, worried about Intels advance into the wireless market, are also angling to develop competencies in other fields besides notebooks. They see WLAN as a key part of ubiquitous computing and are aiming WLAN at products such as printers, projectors, mobile phones, video cameras, Web pads, smart displays and industrial PDAs. One challenge the companies face is that, even though sales of these new devices are on the rise, sales volumes are still too small too generate substantial profits for domestic companies. In addition, although local companies are trying to diversity by targeting the enterprise market, Korean technologies are often less competitive than products from abroad. Local card vendors also largely depend on sales to Korea Telecom and Hanaro telecom, the leading phone companies and ADSL providers.

One bright spot for WLAN companies is the access point business, because Intel gave up on efforts to develop access point devices. Intels move into the wireless arena is also driving Korean telecommunication companies to provide 2.3GHz wireless Internet service by joining with Flarion, an American company. Intels WLAN business may be impacted by these efforts.

"It is difficult to predict how influential Intels Centrino will be," said Kim Jin-ho, VP of Marketing of Netgear Korea. "As for Netgear, we focus on wireless hubs and routers rather than WLAN cards. We have also switched to making multi-function products that combine routers with storage to save movies or MP3s. In the second half of this year, we will release 802.11g equipment that targets enterprise customers. We dont see Intel having much of an impact on this market."

Acrowave, a distributor of WLAN cards and access points to Korea Telecom (KT), Koreas leading phone company, is more worried about Intels strategy. "Consumers dont know that the price of Intel Centrino notebooks has been rising. In fact, buying a notebook with a WLAN card built in is more expensive than buying and setting up a WLAN card on ones own. In order to save costs, we have to develop dual-band 802.11a/g cards as soon as possible," commented Shin Yon-gun, who heads Acrowaves sales force.