The price war is being driven by the entry of new chip makers, primarily in Taiwan. Acer Labs and SiS have begun sampling 802.11b chipsets, while VIA’s networking chip subsidiary will put its own product into mass production in July. Almost all of the newcomers are looking to compete on price. The established players are being forced to do the same.
The need to maintain sales once faster, compatible and at last genuinely standard 802.11g parts come on stream is likely to keep prices down. TechKnowledge reckons 802.11g chips will hit an average $9.68 by the end of the year, just over half the $18 they commanded last year.
Countering the price decline is the fact that many 802.11b chipset vendors buy third-party radio transceivers to connect to their own MAC chips – the parts that handle the network protocols. A limited number of RF chip makers is keeping prices more stable, but again, a number of Taiwanese vendors are believed to be getting reading to enter that market and will drive down the price of RF chips and thus the cost of 802.11b chipsets as a whole.
You generally find opportunity to innovate in the production of IEEE standards only at the system interface and on the analog side, and sometimes with power management, but even those areas are effectively overmined.