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Commentary: Network chips will thrive, but some sellers won't

Network processors have the potential to yield large benefits for enterprises and consumers, but the market will likely see a lot of bloodshed.

    By Joseph Byrne, Gartner Analyst

    Network processors have the potential to yield large benefits for enterprises and consumers, but the market will likely see a lot of bloodshed.

    The market for network processing units (NPUs) will probably not develop smoothly because competition is fierce. The primary competitor that merchant NPU suppliers face is their customers' internal design teams. For example, Cisco Systems has its own NPU.

    See news story:
    IBM promises smarter networks with new chip
    Moreover, a company with strong internal development capability is reluctant to work with external suppliers because such collaboration has the potential to disseminate proprietary intellectual property.

    In addition, a range of merchant suppliers--including such established semiconductor companies as Applied Micro Circuits, IBM, Intel, Motorola and Vitesse Semiconductor--have targeted this market. More competition will come from a range of start-up companies now developing NPUs that can operate at the next level of network speeds: 10 gigabits per second.

    With so many suppliers pursuing a still-nascent market, a shakeout will inevitably occur, driven by technical failure. Products that arrive late to market or fail to meet specifications will either be withdrawn from the market or sold only into niche applications. Enterprises with such failed products will either fold or acquire companies with technically successful products.

    The principal advantage that NPU suppliers purport to offer their customers--that is, mainly system suppliers--is a time-to-market advantage stemming from the promised combination of the flexibility of the microprocessor with the performance of the custom logic circuit. When NPU customers gain a time-to-market advantage, it trickles down to their immediate customers--such as carriers--and finally to end customers, including enterprises and consumers.

    Consumers will benefit from receiving new services--such as virtual private networking, virtual telephone networks, video on demand and service level-based billing--earlier and potentially at lower cost. For example, telecommuters can have phone calls placed to their offices forwarded over the Internet to their homes, or businesses with multiple sites can more effectively link those sites over the Internet without incurring the expense of managing a proprietary wide area network.

    Such technologies increase convenience and decrease the cost of doing business.

    (For related commentary on improving network performance, see TechRepublic.com--free registration required.)

    Entire contents, Copyright ? 2001 Gartner Group, Inc. All rights reserved. The information contained herein represents Gartner's initial commentary and analysis and has been obtained from sources believed to be reliable. Positions taken are subject to change as more information becomes available and further analysis is undertaken. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of the information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof.