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As chief executive of Atheros Communications, Craig Barratt has battled big rivals in the market for Wi-Fi wireless networking chips — rivals like Intel and Broadcom. It’s a battle that’s lasted the better part of a decade. But while there were once 40 Wi-Fi startups in the fray, now there’s only a handful of players left, and Barratt is finally sitting on top.
Having sold more than 200 million Wi-Fi chips since its founding in 1999, Atheros now claims it is the biggest vendor of Wi-Fi chips.
Barratt’s chips are making their way into almost every kind of consumer electronics good, including digital cameras with Eye-Fi cards that upload pictures and videos to the web. Wi-Fi is also built into the Nintendo DS and its upcoming successor Nintendo DSi handheld game player.
Thanks to these applications, analyst firms such as IDC expect wireless chip sales to buck the recession, with the number of shipments continuing to grow in 2009. Wi-Fi chip set sales grew 26 percent in 2008 to 387 million units, with growth driven by cell phones, handheld games, music players and cameras, according to data released by Wi-Fi Alliance and In-Stat last week. About 144 million units were in laptops, a category that saw a 23 percent jump in Wi-Fi units.
The Wi-Fi Alliance, a standards group, and market researcher In-Stat said they expect growth to continue in 2009. That’s pretty good, considering market researcher IDC expects PC unit sales to shrink more than 5 percent in this year.
“The recession will cause a slowdown, but the unit growth in Wi-Fi is so steep that it will continue to grow,” said Linley Gwennap, an analyst at the Linley Group in Mountain View, Calif.
Atheros posted net income of $10 million, up from $9.6 million a year earlier, for its third quarter. Revenues were $138 million, up from $106.3 million a year earlier. It will post fourth quarter results on Feb. 2.
Stationary consumer electronics Wi-Fi units grew 51 percent to 48 million units in 2008, while portable devices were up 33 percent to 71 million. At the recent International Consumer Electronics Show (CES) in Las Vegas, Barratt said he believes Wi-Fi is spreading into more markets and fending off challenges from other wireless technologies.
Atheros sells its Wi-Fi chips to 11 of the top 12 PC makers. And it’s spreading out into other networking chips such as Ethernet wired chips and Bluetooth short-range wireless chips. While Intel’s low-cost Atom microprocessors are taking off in netbooks, its Wi-Fi chip sets aren’t as popular in those devices because of cost. For that reason, said Barratt, Atheros’ chips are being paired with Atom.
While other companies such as WiQuest invested (unsuccessfully) in ultra wideband wireless, Atheros stayed away from that technology, which has begun to falter lately due to a slow standards process and missed performance targets.
Instead, Atheros has continuously invested in Wi-Fi. At CES, the company introduced a new spectral analysis feature that lets a chip sense the environment for interference and adapt itself to avoid the channels where there is too much interference. It is also pushing into cell phones, where Wi-Fi has succeeded thanks to the Apple iPhone. About 70 percent of smart phones shipping in 2009 will have Wi-Fi, said Gwennap. He notes that Atheros has small market share now in cell phones, but that could change since there are a lot of Atheros Wi-Fi cell phone designs in the works.
Among the consumer electronics devices that are shipping with Wi-Fi are high-end boxes such as DirecTV satellite boxes or the inexpensive ($99) Roku set-top box that plays downloaded Netflix movies. Connected Blu-ray players are coming with Wi-Fi built into them so they can connect to online content such as dynamic ads. Even the cheapest DVD players will have Wi-Fi built in, based on unannounced designs in the works, Barratt said.
Atheros will face tough competition in these markets. Texas Instruments and Marvell have been strong in cell phones. Raylink of Taiwan is another big player. Broadcom is a fierce competitor in the notebook market, said Stan Bruederle, an analyst at Gartner. The winner, he says, will be the company that does the best job of exploiting the expanding applications for Wi-Fi.
Wi-Fi is also evolving as a standard and getting faster. Wi-Fi started with relatively slow speeds but really took off with 802.11g, introduced in 2003, with theoretical speeds of 54 megabits a second. With 802.11n, the speeds can range from 150 to 300 megabits a second. Bruederle says the costs of 802.11n Wi-Fi chips has fallen so far that it is starting to replace 802.11g chips.
Theoretically, 802.11n will be capable of 600 megabits a second. But the standard is expected to evolve to gigabits a second with the eventual standardization of 60 gigahertz technology. That will take a few years to happen, Barratt said.
Wireless networks based on Wi-Fi will also be combined with Bluetooth short-range networks (used by devices such as cell phone headsets). At CES, Intel introduced something called My WiFi, which uses Centrino 2 chip sets to let devices bypass wireless access points and connect directly to each other. With this set up, you could take a digital camera and print directly to a printer at high Wi-Fi speeds rather than slow Bluetooth speeds.
Barratt agrees with the vision Intel endorses for connecting devices in a peer-to-peer fashion, with no need for a wireless access point. But he believes the standard has to be compatible with older Bluetooth legacy products. At some point, the Bluetooth and Wi-Fi technologies will be combined, Barratt said.
“Atheros is in good shape because the PC market is so big and Wi-Fi is becoming the dominant wireless protocol,” Gwennap said. “They can get economies of scale in the PC market and that makes the chips so cheap it’s hard for anyone else to compete. That’s what they get for staying the course when dozens of companies disappeared.”
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