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Bluetooth: A question of time - Views on News from Equitymaster
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  • Sep 26, 2001

    Bluetooth: A question of time

    The world in the future will be networked one. All electronic devices will be able to communicate with each other and thus, make life a lot more convenient. A lot already has been a happening in this space. Already there is integration in portable technologies you need to carry.

    A PDA (portable digital assistant aka Palm Pilot) is already married to a cell phone. Motorola has come out with Accompli 009 that is a data access device and a phone. However, while some of the devices will not be integrated physically with others, they will need to communicate. Thus, while there is a single device that serves as a palm top and a PDA, there is a long way to go before your Accompli 009 communicates with your television.

    The technology that will make it possible is known as blue tooth. Read our special report on Bluetooth. All the electronic devices will have a Bluetooth chip that will allow the devices to communicate amongst each other. However, the reason for the sluggish demand for Bluetooth products is two fold. Firstly, not many solutions providers are comfortable with the technology. Its only recently (September 2001) that Wipro became the second company in the world to have all its offerings in the domain qualified by the Bluetooth Qualification Body (BQB).

    And secondly the bigger hurdle is the cost involved. This perhaps is a consequence of the limited availability of the solutions in this space. The current cost of a manufacturing a Bluetooth chip is around US$ 10 15. In the future Ericsson Technology Licensing AB expects this cost is expected to decline to around US$ 2 by the end of 2002. However, according to another leading manufacturer of Bluetooth, Cambridge Silicon Radio, the cost will come down to US$ 5 by 2003. Infact in July this year a European manufacturer of handheld computer abandoned the plans to make organizers with Bluetooth capabilities. The lack of popularity of the technology forced the company to make the decision against Bluetooth.

    The demand for Bluetooth chipsets is expected to be of the order of 950 m units by 2006. This translates to a market size of US$ 2.3 bn. However, Bluetooth has competition from Wi-Fi (wireless LAN also known as 802.11b). While Bluetooth has its origins in Europe, Wi-Fi has been developed in the USA. The advantage of Bluetooth over Wi-Fi is that the Bluetooth chips are cheaper, and use lesser power. Also, Bluetooth does not need a base radio station because every device can create a local network. Also from a security point of view the Bluetooth is more secure as compared to Wi-Fi.

    But both these technologies are expected to be very popular in the future due to the fact that both Wireless LAN and Bluetooth, use the 2.4 gigahertz radio frequency band, which is freely available around the world. Thus, they might give 3G a run for its money. As telecom companies have paid huge amounts to buy spectrum from governments. But of course fundamentally 3G mobile phones can be used anywhere, while Wi-Fi and Bluetooth networks cover only small areas of around a hundred meters, but overlapping networks can easily cover a city. However, companies are working to increase the coverage area to several hundred meters per aerial.

    If one takes the gaining popularity of mobile phones as an indication, then it is undoubtedly a question of time before technologies like Bluetooth and Wi-Fi become commonplace. Wipro has shown the way to the Indian industry, other should take a clue and be prepared.



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