Bluetooth is king once again

By David Hannon -- Purchasing, 2/22/2001

You've heard about it. You know it's going to change a lot of your daily tasks and hopefully make your life easier. And it will undoubtedly have an impact on you as a purchasing professional and as a businessperson, but right now no one is sure how. And no, it's not that top-secret "ginger" invention we've been hearing about.

It's Bluetooth technology.

Bluetooth is a wireless specification that allows the connection of any Bluetooth-enabled computing devices within a short range (30 feet is standard and a 300-foot range can be achieved with amplification). The technology was first introduced in 1998 by the five founding members of the Bluetooth Consortium. Version 1.1 of the standard is expected to be released early in 2001. The spec takes its name from a 10 ^th century Danish Viking king named Harald Blatand, who is best known for uniting Denmark and Norway under Christianity. And like its namesake, uniting disparate items is what Bluetooth technology is all about.

How does Bluetooth work? A wireless connection is made via a low-power short-range radio to connect devices in a piconet or small local area network at a peak connection rate of 1 megabit per second. A Bluetooth chip or PC card is installed on the most powerful device in the network, such as a CPU, to center the connection between multiple devices. The radio-frequency-based technology functions in the Industrial Scientific Medical (ISM) band of 2.4 GHz, which means no licenses are needed to develop products for this band.

Up to eight devices can be connected to the "personal area network" created with the technology. This would let a Bluetooth user walk into his or her office with a handheld device and instantly be wirelessly connected to the PC and every peripheral device in that office.

Bluetooth uses a quick frequency-hopping technique (1,600 hops per second) to minimize interference with other products that use the ISM band, most notably the products using the IEEE 802.11b wireless LAN standard. The frequency hopping also provides security against someone trying to intercept data being transferred across the wireless network.

Market research firm Frost & Sullivan of San Jose, Calif., makes note of the interference issues in a recent report, saying, "In particular, it is clear that when wireless LAN and Bluetooth are used in the same environment, the wireless LAN user experiences a slowdown in performance." And as the number of Bluetooth and wireless LAN users increase, so does the likelihood of this problem.

But at least one player in the wireless market says reports of interference issues between Bluetooth and existing wireless LAN technology are not as bad as they are made to appear. Ron Sparano, program director for mobile market development at IBM, says IBM has tested the use of both technologies in the same space and seen only a performance degradation in the wireless LAN performance-not a network crash. IBM plans to publish a white paper in the near future about the acceptable level of performance degradation.

What's out there now?

Bluetooth has not been without its share of delays. "Next year" has been the battle cry with Bluetooth, but industry watchers say 2001 will be "The Year" for Bluetooth, with new and affordable products being released. The applications for this technology are plentiful and look to revitalize the already raging wireless revolution. Organizers of the Bluetooth Special Interest Group (SIG) have made the license to develop products free to encourage widespread product development. And it's working.

Late 2000 and early 2001 saw the trickling start of Bluetooth-enabled products. In January, Bluetooth pioneer Ericsson released the R520, the first phone approved by the Bluetooth Qualification Review Board. Company officials say the R520 will ship in volume during the first quarter. Ericsson also released a Bluetooth-enabled headset that allows a hands-free wireless connection to a mobile phone without even being in the same room. The headset is scheduled for widespread U.S. release at the end of first quarter 2001.

Stockholm, Sweden-based Ericsson is so bullish on Bluetooth that in November the firm formed a new company to license its Bluetooth intellectual property to chip and module manufacturers as well as large OEMs. In December, Ericsson signed an agreement to supply Bluetooth-related intellectual property to Intel. For its part, Intel is keeping its Bluetooth product plans quiet.

Right now, the upgrade market is the focus for Bluetooth. Electronic component-research firm iSuppli of El Segundo, Calif., says "most cellular phones have a data connection in the batteries now that would allow existing phones to be updated for Bluetooth. These products will enable the early market for Bluetooth, while handset designers work to incorporate Bluetooth functionality in the handset itself."

Market research firm Cahners In-Stat says PC Cards are an excellent, low-cost way to begin using Bluetooth with existing notebook PCs while manufacturers gear up for Bluetooth-integrated notebook models. Motorola's Nibe, Denmark-based Digianswer subsidiary developed and received Bluetooth certification for the PC card that is now being marketed by IBM and Toshiba. Both are selling in the $180-$200 range, but that is expected to come down.

"Obviously, you are not going to reach critical mass on a technology like Bluetooth with a user price of $189," says IBM's Sparano. "We anticipate that price will be reduced over time as other products hit the market." Sparano says Bluetooth will help IBM eliminate some of the numerous ports it now has to include on the back of its ThinkPad computers. Fewer ports mean less weight and lower cost.

Finnish cell phone giant Nokia unveiled its Connectivity Pack in December, which lets users create custom, wireless connections between the Nokia 6210 mobile phone and any Bluetooth-compatible laptop.

Several companies began supplying samples of Bluetooth chipsets in 2000 with one chip for the radio transmitter and a separate chip for baseband processing. Texas Instruments is shipping samples of its Bluetooth chipset, which includes a 0.18-micron ROM-based Bluetooth baseband with a fully integrated Bluetooth software stack and TI's RF transceiver. Silicon Wave of San Diego is marketing Bluetooth chipsets for $15 each and its San Diego neighbor, inno COMM Wireless, released a Bluetooth radio receiver chip in January, which is designed to reduce power consumption in wireless devices. inno COMM 's ICM3101 preserves battery life by only powering up the baseband processor when it has confirmed that a message is for the host device, and it switches off unnecessary power supply at task completion.

But the future goals are clear. iSuppli says "all product roadmaps lead to a single-chip implementation." Right now, Cambridge Silicon Radio (CSR) of Cambridge, England, holds the lead in this area with its first-generation Bluetooth chips, dubbed BlueCore. BlueCore01 began shipping to manufacturers in November, but it does not include embedded memory. The flash memory on this chip is external, which keeps the cost down (device manufacturers need a second chip for BlueCore to work with software stacks). BlueCore 01 currently sells for $8.50 each (per million chips ordered).

Whether CSR's product is a "single chip" solution is a matter of debate. "Right now, there is not a single-chip solution on the market," says Joyce Putscher, an analyst with Cahners In-Stat. "CSR's comes very close, as it provides both the RF and baseband control integrated onto one piece of silicon. But the flash is still separate. So, technically, it is not a single chip yet." To end that debate, CSR is currently sampling BlueCore02, which is smaller and integrates flash memory. CSR expects to sell five million BlueCore chips in 2001 after selling 50,000 in 2000.

"Most manufacturers will be migrating to a single-chip solution in their second- or third-generation products," says Navin Sabharwal of Allied Business Intelligence, a market research firm in Oyster Bay, N.Y. "But while a single-chip solution implies cost savings, it also may mean higher power consumption and poorer radio sensitivity." Other companies close to releasing a single-chip solution are Alcatel and Global Communication Technology.

Price priorities

Most industry experts believe that price will be the most decisive factor in Bluetooth's future. At the first press conference announcing the Bluetooth standard, the target cost of $5 for a single chip was established as the goal. But some in the industry consider that an overly aggressive target so early in the technology's lifecycle.

Newton, Mass.-based market researcher Meridien Research says price is the "make or break factor in Bluetooth's success" and prices for Bluetooth chips need to reach between $10 and $15 per chip "in order for this technology to reach mass-market status." Meridien expects that to happen in 2002.

iSuppli estimates the current cost for a complete Bluetooth module is $25-$30. "It seems a long way from achieving the goal of $5," the iSuppli report says, adding that semiconductors alone cost $16. iSuppli also says that to achieve the desired cost levels, two events will take place in the market. Profit margins must be sacrificed in the near term and the entire industry must focus on developing a $5 module in the next 4-5 years.

A statement from Ericsson says, "the price of Bluetooth transceivers is expected to come down gradually to an integration cost of no more than $5 per module. A possible option of incorporating a large part of the Bluetooth silicon into existing chipsets could also lower costs further."

Cahners In-Stat says costs can be cut with less-expensive packaging, one-chip solutions that combine radio and baseband functions, and solutions that transfer some of the work to a host processor.

inno COMM 's Vice President of Engineering Ken Lazarus said in a recent news report that a single-chip radio manufactured in complementary metal oxide silicon (CMOS) is the "obvious route to take" in light of cost restraints. "Cost, performance, power efficiency, chip size and integration have been the key drivers in our design," Lazarus said.

Bluetooth will affect the cost of the products it's integrated into slightly, but Sabharwal says OEMs want to minimize that. He says chip prices were between $20 and $25 in 2000, and this year prices will get into the $15 range. By the end of 2001, prices will be in the $10 range on the way to the $5 goal, according to Sabharwal.

"Five dollars was always a goal, but it was never meant to be something we could get to right away," Sabharwal says. "But the problem is when you talk about a $5 chip solution added to a product, you have to multiply that by two or three to get the effect on the retail price. So that may mean adding $10 to $15 on the cost of a cell phone." Sabharwal says, initially Bluetooth will appear in high-end phones and the notebook or desktop market because the expense of a notebook can better absorb the $10 to $15 cost.

Crystal balling

Bluetooth has had its share of delays. Allied Business Intelligence points out that the Bluetooth 1.1 specification has been delayed and the delayed rollout of General Packet Radio Service phones has slowed interest in Europe.

Sabharwal says the original idea was that everyone would develop products of product spec 1.0b, but product developers found too many bugs in it, so they decided to wait for version 1.1, which is nearly completed. As a result, some vendors have been holding back on aggressively marketing products that comply with 1.0b, primarily for its connectivity concerns. IBM and Toshiba's PC cards are the most notable exception.

But the projected market growth for Bluetooth in the next five years is strong. Cahners In-Stat predicts that sales of integrated circuit solutions for Bluetooth systems will exceed $4.9 billion by 2005, but says innovation and R & D will be needed to cut the projected high costs of early Bluetooth solutions. Current forecasts put the manufacture of Bluetooth-enabled equipment at one billion units by 2005.

Cahners In-Stat reports the opportunity for radio and baseband solutions will surpass $1.5 billion in shipments by the end of 2002 and soar to almost $5 billion by 2005. Integrated RF/baseband and host-supported solutions will emerge and realize significant gains by 2005."

According to a company press release, Ericsson expects the home communications market to develop within the next three to five years, reaching a similar size as today's home PC market. In January, Ericsson announced it was outsourcing all of its handset production to Singapore-based contract manufacturer Flextronics Inc.

A Meridien report says "Bluetooth faces the age-old chicken-and-egg problem: Its value will increase as it becomes more widely used, but it won't become more widely used until a number of people have it available." Meridien also points out that local regulations in Japan, France and Spain reduce the bandwidth available and France does not allow free use of the band because it is partly used by the French military. Japan also has regional regulations, which could delay the launch of Bluetooth in these areas.

iSuppli expects the semiconductor market driven by Bluetooth to grow to nearly $2.5 billion by 2004. iSuppli listed in its Bluetooth report 25 semiconductor firms that were developing Bluetooth-related products. The report also said notebook PCs will lead the adoption of Bluetooth in computing devices with an 18% penetration rate in 2001, growing to 94% penetration in all mobile computing devices by 2004. Desktop PCs will see a 2% adoption rate in 2001 and a 38% adoption rate in 2004. iSuppli researchers say that between 2000 and 2004, the growth in this market will surpass the expansion of any other electronics market in recent history.

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