If WLAN Is Such Good Business, Why Is Everyone Bailing Out?
By Mike Masnick, Wed Mar 02 01:45:00 GMT 2005

Just as new predictions talk up the potential for the WLAN market, it looks like the chipmakers providing the core pieces of these networks are looking to get out of the market as quickly as possible.

By most accounts, the wireless local area network market is booming. Wi-Fi is a standard feature on most laptops these days as well as many PDAs. Next generation efforts are underway to improve the speed and range of Wi-Fi and some other technologies are looking to get into the WLAN space as well. On top of that, there are stories everywhere about efforts to build Wi-Fi based hotzones or hot-cities.

The latest news is that, thanks to the rapid growth of Wi-Fi, many companies are looking to add Wi-Fi to consumer electronics offerings. This is already happening at the fringes, but is likely to become much more common. Think stereos that can pull your MP3s off the network, or DVRs that will easily let you transfer saved TV shows to your computer. Combined with the latest attempts at digital hubs in the home and it seems like a no brainer.

However, as the technology continues to catch on and with plenty of opportunities to expand, why is it that everyone wants out of the market? Various WLAN chip makers are trying to close down or sell their WLAN chip businesses, citing a continued lack of profits.

The answer might not be that complicated. The chip business is a commodity business -- which can be profitable if you do it right, but it's not a business where it makes sense for too many providers to be fighting it out. As the WLAN market matures, the less efficient producers need to give up the market to those who have better manufacturing capabilities or some other value-add (real or perceived) above and beyond the competition. So, rather than being worried that companies are exiting the space just as new opportunities are becoming clear, it might just be a sign that the market is settling down and maturing.