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The Commercial Market

June 1, 2003
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The Commercial Market


Small Business IT Expenditures 2002-2006

In-Stat/MDR estimates that the small business market (firms with 5 to 99 employees), in aggregate, spent more than $154 B on information technology in 2002, up almost four percent from 2001 estimates. By 2006, In-Stat/MDR estimates that small businesses will spend roughly $192 B on information technology products, services and personnel. This market is the second largest purchaser of technology in the US, second only to the enterprise market. Given this, these customers are definitely key targets for IT providers of all types. However, In-Stat/MDR research suggests that telecom and LAN equipment providers will most likely experience the biggest bang for their marketing dollars in this segment, as these will be two key areas of technology spending in this market for years to come.

Increasing spending per firm in this market, combined with growth in the number of small businesses, is expected to lead to fairly strong growth in total small business IT spending over the next several years. Annual growth in IT spending is expected to continue to increase through 2005, where it is expected to peak at more than six percent.

In comparison to other business segments, the overall small business market is the second largest in terms of IT spending, behind the enterprise market, accounting for roughly 31 percent of all US business IT expenditures this year. This market's share of IT expenditures is expected to grow over the next several years as these firms continue to become more sophisticated in their use of technology.

Automotive Semiconductor Market Growth to Continue

The semiconductor content of an average vehicle will continue to grow exponentially, stemming from a barrage of new, advance safety, engine and chassis control technologies in new vehicles over the next few years.

According to a new report by Allied Business Intelligence Inc. (ABI), the global automotive semiconductor market, driven by these new systems, will grow from a projected value of $12.3 B in 2002, to just over $17 B by 2007. The largest application for automotive silicon is body and chassis control, which includes electronic traction, suspension and stability control systems. This segment commands approximately 26 percent of the automotive semiconductor market and will be worth $4.4 B in 2007.

"Despite a decrease in global vehicle production, the growing demand for automotive-specific semiconductors will continue and the adoption of new automotive electronic systems will be driven by differing factors worldwide," said Frank Viquez, director of Automotive Electronic Research at ABI. In the US, new government legislation mandates that automakers implement advanced airbag safety systems and tire pressure-monitoring systems in future car lines. Also, new car and light truck rollover testing methods adopted by the national highway traffic safety administration (NHTSA) are expected to influence carmakers to install stability control systems to gain better rating.

The study, "Automotive Electronic Systems: Emerging Markets for Power Train, Safety, Chassis Control and Infotainment Systems and Their Effect on Semiconductor Demand," explores the proliferation of electronics into the automotive platform, with a special focus on micro controllers. The report provides a comprehensive overview of growing automobile technologies, including VVT, DoD, collision avoidance systems, telematics, 42 V power systems and x-by-wire.

Popularity of WiFi Drove WLAN Chip Market in 2002

The year 2002 was a great year for wireless LAN component manufacturers, with sales of wireless LAN chip sets growing strongly over the previous year, despite a very slow world economy and a slow semiconductor market in general. The high tech market research firm, In-Stat/MDR, reports that most of these sales were driven by the huge popularity of 802.11b products (WiFi). However, 802.11g products have started to arrive with great customer acceptance, and 802.11a and combo chips will also play importantly in the mix. "2002 could be best described as a transitional year for wireless LAN; both for chip makers and the standard overall," says Allen Nogee, a principal analyst with In-Stat/MDR. "It was the year that wireless LAN made the transition from niche application to mainstream technology and one in which chip makers refined their strategies and formed alliances and partnerships in preparation for the long haul. In addition, it was a year in which direct-conversion architectures, using RF CMOS, gained legitimacy and a year where Bi-CMOS and super heterodyne designs had their supporters as well."

In-Stat/MDR has also found that:

  • Despite terrorism concerns, a very slow worldwide economy and a horrible time for semiconductor manufacturers in general, wireless LAN chip sets sales grew to more than twice the level of the previous year, to over 20 million.
  • In 2003, the amount of growth in wireless LAN does not show any sign of slowing down. With wireless LAN chip prices still dropping rapidly and the number of uses for these chips increasing just about every day, there is no question that the growth of wireless LAN will continue. In 2003, the number of chip sets forecast to be sold will reach over 33 million and by 2007, the number of wireless LAN chip sets is forecast to be over 94 million.

Fueling the growth is one giant application with a second, potentially giant, application in the wings. The current giant application is the laptop, perhaps the original wireless LAN application that started it all. Both Intel and Microsoft want to see wireless LAN included in all new laptops sold and all indications are that soon it will be. In-Stat/MDR is forecasting that by the end of next year, over 70 percent of new laptops purchased will come with some type of integrated wireless LAN support. The second, potentially giant, wireless LAN application is wireless LAN embedded in a cellular handset and used for voice-over-IP (VoIP). While this application is still in its infancy, the potential for hundreds of millions of wireless LAN chips is certainly present.

The report, "The Wireless Road Ahead - The Wireless LAN Chip Market Today and Beyond," covers wireless LAN technology from both a standards and component point of view, and explores the many changes occurring in the industry. In addition, the report takes a look at the companies making WLAN chips and the products they are developing. The report contains chipset forecasts through 2007, including chipsets by standard and WLAN chipset revenue by standard. Breakouts are included for the home and enterprise, and include subtotals by type of end-product device, along with forecasts for WLAN chips in laptops and cellular handsets.

3G Launches to Peak in 2004

Realities of 3G launches are far from what operators anticipated just a few years ago, when they committed billions of dollars in 3G fees, adhering to stringent regulatory terms and conditions. According to Allied Business Intelligence (ABI), the number of 3G network launches will peak in 2004, but developed regions may not have complete coverage until 2007. North America will see 3G launches starting in the third quarter of this year. Interestingly, the 2.5G subscriber base for CDMA20001X- and GPRS-based networks have been able to lure large volumes of customers, as operator-specific services like Vodafone Live and Sha-mail offer unique services and contents. EDGE has appeared as a viable alternative to 3G due to its increased voice capacity and higher data speeds. With a substantially lower development cost, many operators have EDGE in their deployment charts. ABI anticipates about 15 EDGE network launches in 2003. Though EDGE networks will be in the spotlight this year, operators may be forced to launch 3G networks in the long run. The expected crunch in voice capacity will eventually force the hand of many operators to move to 3G networks.

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