The Bluetooth Plays: Part 2

Editor's Note: In Part One of this series, columnist Steven Nagourney looked at the rapid development of Bluetooth, the short-range wireless interface technology that uses unregulated frequencies to connect electronic devices. Here, he examines some of the companies most actively engaged in developing Bluetooth technology.

Soon, everyone will have Bluetooth fever: Ericsson's (ERICY) new Internet appliance, the HS210 Cordless Screen Phone, combines a cordless phone and Internet access in a touch pane. Toshiba's first such product, a Portege notebook PC, is scheduled for introduction in the second half of this year. In April, Conexant (CNXT) bought Canadian firm Philsar Semiconductor, which developed radio signal processor technology for software-configurable radios. These products adapt to multiple communication protocols as the next generation of silicon radio architecture emerges. Philsar supports open standards such as Bluetooth.

It is expected that many original equipment manufacturers, or OEMs, will announce a flood of new wireless Bluetooth products in the second half of the year. Motorola (MOT) announced Monday that it is now shipping to IBM (IBM) and Toshiba internal PC cards and an external USB port (universal serial bus, which connects a PC to printers and other peripheral devices) that will make laptop computers Bluetooth-enabled. This will enable the computer to be connected without using the standard cradle-and-wire system of today. Motorola expects to offer Bluetooth-enabled cellular phones and headsets by the end of the year and Bluetooth technology for automobiles by next summer.

Last month Psion signed an agreement to provide Bluetooth to Dell Computer (DELL). Earlier this year, TDK (TDK) introduced a 300-foot radius internal PC card, and a Bluetooth USB adapter and CompactFlash card, with production scheduled for the third quarter. Texas Instruments (TXN) is also expected to demonstrate its first Bluetooth technologies.

3Com (COMS), Motorola and Fujitsu plan to use Extended Systems' (XTND) Bluetooth protocols for their operating system. In fact, Extended announced Monday that it has begun shipping Version 1.1 of a software development kit for implementing Bluetooth protocols. Xircom (XIRC) also said on Monday it has agreed to develop and make wireless connectivity products for Ericsson, and it will work on integrating Bluetooth technology into wireless data products aimed at markets for notebook and handheld PC devices.

NEC (NIPNY) is using National Semiconductor's (NSM) two-chip chipset for a prototype notebook PC that has a built-in Bluetooth solution and antenna. Privately held Widcomm secured $35 million in its second round of financing led by Texas Instruments, Alcatel Alsthom (ALA), Conexant, Philips Electronics (PHG) and Psion, and venture capitalist Sienna. The company licenses Bluetooth-protocol software to chipset companies and equipment manufacturers, and licenses complete product designs to OEMs and manufacturers integrating Bluetooth into personal digital assistant, or PDAs, notebook PCs and desktop PCs.

The market potential of this solution is thought to be huge because the frequency spectrum that is used means a single transceiver module can be used nearly anywhere on the globe. So, there is enormous potential for the development of new business aimed at the world market. Until now mobile phones have had different regional standards that have kept market sizes down.

Fabless chipmaker Dialog Semiconductor, currently listed on the German Neuer Markt and Easdaq, said today it would seek a Nasdaq listing, and will offer 2 million new shares in the process. A further 6.5 million shares will be sold by existing shareholders, so more than 50% of the issued stock will be freely available in the market. Dialog Semiconductor is an outstanding play in the mobile communication integrated circuit segment, which represents 84% of the company's first-quarter revenue. For its audio and power management integrated circuits, or ICs, customers include a broad range of top-tier manufacturers, such as Ericsson, Motorola and Siemens (SMAWY), and Sagem). Dialog will be a major player in Bluetooth, especially as all functionality will be integrated into existing ICs rather than exist as a standalone chip.

Alcatel Alsthom is using a chip that integrates radio frequency and baseband functions, and also includes 4 megabytes of embedded flash memory. Prototypes are planned for August, with final samples in December and production beginning in January 2001. In the U.K. there is privately held Cambridge Silicon Radio, that has received venture capital funding from Intel Capital with a chip product planned for the second half, in advance of Alcatel's.

One company that has captured our attention is the 2-year-old semiconductor firm Innovent Systems, with venture funding from Crosspoint Venture Partners, Smart Technology Ventures, Broadcom (BRCM) and Samsung among others, which last week announced a collaboration on the first all-Bluetooth chip. The chip is Innovent's first baseband chipsets for OEMs, and implies that a high-level performance IC can be manufactured at an acceptable price and with a production-proven process. By the way, Broadcom earlier this year acquired Pivotal Technologies, which is working on a Bluetooth offering of its own. Broadcom said Tuesday it will pay about $440 million in stock to acquire Innovent.

Single-chip solutions and solutions that use a host processor for baseband functions will emerge and realize significant gains by 2005, especially since the parts can be used around the world, and it would appear they will be made at low cost. For Bluetooth components manufacturers the potential would be sudden demand for tens of millions of devices.

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