Bluetooth: Continued Success, but Complications Loom on Horizon

Bluetooth had another successful year in 2006, and will have continued success in 2007. Mobile phones continued to be the dominant application for Bluetooth in 2006, representing over three-quarters of Bluetooth-enabled device shipments. Mono headsets and notebook PCs were the next largest applications.

Growth for Bluetooth devices has traditionally been fairly robust because of the popularity of Bluetooth in mobile phones. As one of the single best-selling consumer devices shipping worldwide, penetration into the mobile phone market guaranteed that the Bluetooth silicon market would see huge shipment increases annually along with falling average selling prices (ASPs). However, that growth rate is beginning to slow when compared with past years. From 2003 to 2006, the compound annual growth rate for Bluetooth-enabled device shipments was in the triple digits. In comparison, the growth rate from 2006 to 2007 will be under 40 percent.

The Bluetooth silicon market is also beginning to see some market consolidation, as larger silicon vendors add to their chip portfolios through new technology development or acquisition. CSR, long a leader in Bluetooth silicon, has added Wi-Fi capability over the past few years, and recently purchased two companies in the GPS business. Wireless chipmaker Qualcomm purchased Bluetooth chipmaker RF Micro Devices, as well as Wi-Fi chip maker Airgo Networks. Broadcom, already strong in Bluetooth and Wi-Fi silicon, recently added GPS chipmaker Global Locate. The traditional Bluetooth silicon business is transitioning into a combination radio silicon business, driven primarily by demand from mobile handset vendors and wireless service providers eager to offer increased functionality.

New Bluetooth standards further complicate this radio integration trend. In June 2007, the Bluetooth Special Interest Group (SIG) announced that it had merged with the Wibree Forum, and it would offer Wibree as a Bluetooth standard, likely to be called ultra low power (ULP) Bluetooth. This standard will target new markets, such as health and exercise equipment, watches, and running shoes that require the lowest levels of power consumption.

Another Bluetooth standard on the way is high data-rate Bluetooth, sometimes referred to as Bluetooth 3.0. The Bluetooth SIG announced in 2006 that the high data-rate standard would be based on the Wi-Media Alliance's Ultrawideband (UWB) standard, establishing Bluetooth over UWB as the high data-rate Bluetooth standard. Bluetooth over UWB chips should hit the market in late 2009. A potential rival technology to UWB has recently emerged i.e. Wi-Fi. There is a study group within the Bluetooth SIG that is looking at the feasibility of Wi-Fi as the basis for high data-rate Bluetooth. This has the potential to complicate and ultimately delay the adoption of high data-rate Bluetooth, as rival camps battle within trade associations and in the market.

Though the market is becoming more complex, Bluetooth chip shipments will remain very healthy for the near future. Overall, Bluetooth-enabled device shipments will grow at an annual rate of 23 percent through 2011.

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