Silicon Opportunities in Powerline Home Network Market - In-Stat/Insights

POOR POWERLINE. AFTER THE MUCH-HYPED launch of HPNA phoneline networking products in 1999 and the success of wireless LAN products for the home based on 802.11b, there hasn't been much room for another physical media to elbow its way into the attention spans of system designers looking to develop networking, CPE and convergence products for the home. Part of the problem has been a lack of a widely adopted standard, but with the arrival of HomePlug, that is about to change.

So what does HomePlug mean for system and chip vendors looking to cash in on potential opportunities on this newest of no-new-wires technologies? Before we answer that, let's first take a look at the recent past.

On this eve of the arrival of HomePlug-compliant products, many are skeptical. They believe that HomePlug will experience the same problems that have plagued HPNA, which is by most accounts a disappointment from a sales and end-user adoption standpoint. Because of this belief, many are taking a wait-and-see approach with powerline networking.

It's instructive to examine why HPNA has fared poorly. There are a few reasons, the most basic of which is that consumers just didn't understand it. No matter how many times you told them that you can network over the same copper wires that your phone communications go over, even at the same time, most folks outside of the technology industry would look at you with glazed eyes (and you can forget about telling them the definition of multiplexing).

But it wasn't just a lack of understanding. Another problem that HPNA products faced was a limited product line. Think about it: NICs alone do not n market make. The success of home routers from companies such as Netgear and Linksys have validated our research that shows consumers' No. 1 reason for home networking is broadband sharing. You can't expect more than a very few early adopters to network PCs using hybrid Ethernet and HPNA products if they have to use multiple NICs per PC (a scenario that would be necessary with no HPNA ports on a home router or an Ethernet to HPNA bridge). HomePlug, for all of its doubters, has gotten this part right as IC vendors such as Intellon, Conexant and Cogency are looking to provide MII interfaces for connecting their chipsets into a router system and are also providing reference designs for routers and bridges. Both Netgear and Linksys have announced they will release HomePlug routers and bridges in 2002.

All that being said, Cahners In-Stat Group believes that the powerline networking market will create opportunities for companies in the access, local connectivity and digital convergence space. Some access silicon players will want to obtain functional blocks to add powerline connections to their offerings, as most have realized that being simple modem providers isn't going to cut it anymore. Those selling ICs and into set-top box and other markets have heeded the call for wireless connections from their customers, and soon powerline may be on those RFPs coming in from service market for home networking to grow from just $5 million in providers. These dynamics will result in the powerline IC 2001 to more than $157 million by 2006. Not n huge market, but if you consider the value of access and convergence silicon that will incorporate interfaces to powerline transceivers, this market is going to be potentially much bigger and one that most IC vendors would be wise to pay attention to.

Mike Wolf is the director of enterprise and residential networking at Cahners In-Stat Group. Keep an eye out for his forthcoming report, "Power to the People: What HomePlug Means to Home Networking", which will include forecasts for HomePlug equipment and silicon as well as market analysis and vendor profiles.