Intel's hooked on wireless

Intel jumped into the wireless world this week, but the company will face some static as it wedges its way into one of the tech market's hottest segments.

With the introduction of Centrino, the Santa Clara, Calif.-based chipmaker formally entered the market for Wi-Fi components that allow PCs to connect wirelessly to the Internet or other PCs.

While Intel's heft makes it a formidable rival, established competitors will have the advantage--at least for now. Broadcom, Intersil and Atheros all make Wi-Fi chips that analysts say are faster and more versatile than those found in Intel's components.

These companies, however, face a looming issue: standards. All Wi-Fi chips are made to conform to established protocols, which limits the performance differences and design. As the performance gap narrows, price and compatibility could tip the advantage to Intel.

A year from now, competitors' chips "won't be any better than Intel's," said Will Strauss, an analyst at Forward Concepts. "There are no standards for graphics chips (a market Intel failed to crack). There are in communications."

"As standards start to converge, a lot of aspects of the technology become more commoditized," added Richard Enochs, product marketing manager for the T-series of ThinkPads at IBM.

For whatever reason, Intel's message, or technology, is hitting its mark. Every major PC maker has announced plans to use Intel's wireless module in some capacity. IBM uses it as its standard wireless offering on its three new notebooks.

Even so, as Strauss and others pointed out, Intel has had to delay its own homegrown Wi-Fi chip, and it's unclear how well the company will ultimately do in this market.

Price versus performance
For Intel's prospective customers, PC manufacturers, the Wi-Fi debate centers on price versus performance. The Intel Pro/Wireless 2100 network connection, the wireless module inside Centrino, includes all the packaging and software needed for making a wireless connection, such as a radio that can send and receive data over spectrum dedicated to the 802.11b wireless standard. The 802.11b standard uses the 2.4GHz radio band.

The module sells for $46.25 in 1,000-unit quantities when sold on its own. If bundled with a Pentium-M processor, the price drops by half or more, according to a company representative.

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Including that discount, Intel's prices are slightly cheaper than competing products, according to various estimates, but will become substantially less expensive in the second half, sources close to the company said.

Competitors, though, point out that selling a radio and selling one that will work in all circumstances are two different things. Design issues can affect performance, range, power-consumption and security.

"You may have trouble connecting unless you have a well-designed radio," said Jeff Abramowitz, senior director of marketing in Broadcom's home networking business unit. "One (person) might connect at 11 megabits and another won't."

Although 802.11b is the most common standard for Wi-Fi networks, Broadcom and others are already selling chipsets to PC makers that can handle 802.11a/b, 802.11a/b/g or 802.11b/g, which transmit at higher speeds.

Intel won't have a high-speed module until the middle of the year when it comes out with its own 802.11a/b chip. It will follow with an 802.11a/b/g chip in the second half, according to Anand

		News.Commentary More than just chips Intel's new Centrino line--plus branding efforts and investments-- should spur the wireless sector.

Chandrasekher, general manager of the mobile computing products group at Intel.

A history lesson
Historically, Intel has been able to enter, and ultimately succeed in, new markets when the products are intimately associated with the processor, such as chipsets or motherboards, or when low costs are an overriding factor, such as with flash memory or network chips for PCs and notebooks.

Conversely, the company has not fared as well when those two factors are not present. In 1998, Intel unveiled its first standalone graphics chip. Analysts and chip executives predicted that the chip's design, combined with Intel's tremendous manufacturing muscle, would allow the company to rapidly rise to the top of that market.

Instead, few PC companies adopted the chip, and Intel bailed out 18 months later. Ironically, Intel subsequently became the top graphics company in the world through integrating graphics into its popular chipsets. In effect, the company found a way to tie the sales of graphics chips tightly to the sale of processors.

Wi-Fi chips fall somewhere in the middle of those two scenarios, said Mike Stinson, vice president of the mobile products group at Gateway. Wi-Fi radios are more similar to each other than graphics chips, which increases the importance of low pricing. But they aren't commodities, either.

"It is not like a modem. You have more substantive tuning issues," he said. "There is more interplay between the chip and the notebook itself."

"The chips themselves deliver the same technology." --Margaret Franco, marketing manager, Hewlett-Packard

Still, at some point the technology between chips from different providers will likely converge to a common level, which could give Intel leverage. The company, in fact, has been able to use the circumstances in the communications market to become a leader in local area network (LAN) chips. Most of the PCs sold today come with an Intel LAN chip on an Intel motherboard.

Intel also is spending extensive amounts of time and money in ensuring its Wi-Fi parts will work with its PC chips, as well as with so-called hot spots--public places that give people wireless access.

"The chips themselves deliver the same technology," said Margaret Franco, marketing manager for business mobile products at Hewlett-Packard. "It is all industry-standard stuff."

Peter Hortensius, general manager of the Think Offerings division at IBM, indicated that Big Blue is already looking at adopting Intel 802.11a/b parts for use in ThinkPads later this year.

Although Intel doesn't have a long history in making communications chips, the company enjoys an advantage in manufacturing. With 13 fabrication facilities worldwide and numerous testing and packaging facilities, the company can make cheaper chips than virtually anyone. By contrast, competitors such as Broadcom outsource these functions to companies such as Taiwan Semiconductor Manufacturing Co., which tends to add costs.

Intel's wireless module also is far from generic, Chandrasekher said. The company has included software that allows people to run Bluetooth and Wi-Fi simultaneously, as well as software that lets users roam across wired and wireless networks

"You aren't going to get that from Broadcom," he said.

No success yet
Nonetheless, making wireless chips isn't simple, and Intel so far hasn't succeeded. The Intel Pro module contains a Wi-Fi chip from Philips Semiconductor because Intel had to delay its own part. Other efforts in the company's communication group have not met expectations, Forward Concepts' Strauss said.

"In terms of wireless, Intel is still playing catch-up," he said.

Rather than wait for the company to get its wireless act together, competitors are preparing to attack in different ways. Broadcom, for instance, is concentrating on adding performance and "future proofing" its parts. The company has incorporated 802.11(i) security for encryption and decryption on its 546 chipset, which is currently on the market. By adopting the security technology now, corporate customers can begin to tinker with it. Additionally, performing these functions in hardware is faster than in software.

"In terms of wireless, Intel is still playing catch-up." --Will Strauss, analyst, Forward Concepts

In fact, the relatively large number of variables in wireless communication will likely prevent any single company from dominating through price, Atheros CEO Rich Redelfs said.

"Ethernet runs over a predictable medium, and the technology advanced to where we couldn't get much better," Redelfs said. "But the air has more garbage in it in the form of interference from appliances and walls. There is a tremendous amount of innovation left to do to reach maximum performance."

Broadcom also is integrating chips to cut costs. Right now, it sells a two-chip 802.11b unit and an 802.11g unit. Both of these will turn into one-chip solutions by the end of the year. The company also just released an 802.11a/b/g chipset that Dell Computer has adopted in its corporate laptops.

Intel's marketing push has nonetheless put pressure on chipmakers and has drawn PC makers to focus more intently on price. "The notebook vendors are looking for the lowest possible cost solution," Abramowitz stated.

Ultimately, the losers in the pricing squeeze may be the smaller chip manufacturers because large manufacturers such as Broadcom will be able to integrate additional functions such as Bluetooth to remain competitive.

"What you will see is a combination chip, and anyone who doesn't have it all will be in trouble," Abramowitz said.

News.com's John Spooner contributed to this report.