U.K. Firm Prepares to Deliver US$8 Bluetooth Chip

SAN FRANCISCO (08/03/2000) - Cambridge Silicon Radio Ltd. (CSR) is getting ready to deliver a single-chip Bluetooth product to customers by September at a price per chip at least half that of current analysts' estimates, according to a senior executive at the U.K.-based single-chip radio company.

Bluetooth is a wireless PAN (personal area network) standard aimed at enabling a wide variety of devices, including mobile phones, PCs and handheld computers, to exchange digital voice and data over short distances using low-power radio signals. The first Bluetooth-enabled devices are due to become generally available in the fourth quarter of this year.

Analysts today peg the price for a Bluetooth chip at between US$20 and $US25 with the cost not expected to drop to the $US5 range until 2004 or 2005.

"Industrywide, we accept the average sales price for a Bluetooth silicon solution to be in the neighborhood of 20 U.S. dollars," Joyce Putscher, director of consumer and converging markets and technologies for Scottsdale, Arizona-based market research company Cahners In-Stat Group, said in a recent phone interview.

CSR, however, claims it will be able to deliver its first product, the single-chip BlueCore01, for $US8.20 for volumes of 1 million units per year.

Depending on users' needs, the price might rise to between $US10 and $US12, which still remains below the competition's figures, said Eric Janson, CSR's vice president of application engineering.

Although CSR's price for its Bluetooth chips appears quite low at the moment, a number of factors can force the price per chip considerably higher, Putscher said. "Not everybody is necessarily going to order 1 million unit quantities right now, but they certainly will in the future" she noted.

Additionally, Putscher warned that some users may require more external components than others -- another factor leading to a higher-than-expected cost. However, "if CSR can deliver on what they are saying, they are on the leading edge," she said.

The BlueCore01 chip is also smaller than those of its rivals, Janson claimed, estimating that the processor is four-tenths the size of a Bluetooth module from L.M. Ericsson Telephone Co.

"Our real aim is to enable the volume growth of the Bluetooth market with the smallest size and lowest cost chip," Janson said.

BlueCore01 integrates 2.4GHz radio, baseband and microcontroller on a single CMOS (complementary metal oxide semiconductor) chip and offers low power consumption, CSR said.

The final BlueCore01 silicon will debut at the end of this month, at which time Janson expects to be able to give some more concrete projections on shipping numbers. Currently, he predicts that by the end of September, CSR will ship tens of thousands of products a month -- a figure that the company hopes to increase to hundreds of thousands in the not-too distant future.

Putscher at Cahners In-Stat, warned that the lack of current applications for Bluetooth products makes predicting timetables for usage of the technology somewhat difficult.

BlueCore01 is the first in a family of Bluetooth offerings from CSR, Janson said. By the end of this year, sample quantities of BlueCore02 will be available, with mass production due to start in the first quarter of 2001. The BlueCore02 chip, known as a "module-on-a-chip" will feature the Bluetooth software stack in either Flash RAM (random access memory) or mask ROM (read-only memory), thus further reducing the size and cost of the unit. The chip should cost under $US5 in the 2001-2002 time frame, he added.

BlueCore03, a "true system-on-a-chip," will be dedicated to applications, according to Janson. Containing an application layer and drivers, the chip will be able to integrate application software and simple user interfaces, he said.

Engineering samples of BlueCore03 will be available in the first quarter of next year, with the chip going into production in the second quarter of 2001.

CSR is a fabless operation, meaning that it outsources the manufacturing and testing of its chips, while the U.K. company concentrates on designing and engineering the chips. "STMicroelectronics (NV) is one of our fab partners, we have two others in the Far East," Janson said.

The U.K. company will be able to turn around orders for BlueCore in seven days or fewer from receiving the order to delivering it, he added. In the future, CSR aims to offer assembly and testing capabilities at its third-party fabrication plants (fabs).

Demand for Bluetooth chips is likely to be extremely high once devices enabled with the technology really start to take off next year, according to analysts.

Cahners In-Stat predicts that by 2005 more than 1 billion Bluetooth-enabled devices will have shipped, while total shipments of Bluetooth chips will hit 1.4 billion units, generating a market valued of $US5 billion. [See "Study:

Bluetooth Chips to Hit 1.4 Billion by 2005," July 27.]However, some analysts have warned that Bluetooth is in danger of becoming overhyped and that once the technology is generally available, it may fail to deliver on some of its evangelists' promises. [See "The Good, the Bad and the Reality About Bluetooth," July 7.]Janson described the hyping of Bluetooth as a "legitimate concern," but one that he hopes will be addressed by the certification of Bluetooth-enabled devices and by the availability of third-party testing equipment. He also mentioned the "unplugged fests" that the Bluetooth Special Interest Group (SIG) runs where vendors can test the interoperability of their Bluetooth-enabled products with other companies. Such testing is carried out under strict NDAs (nondisclosure agreements), Janson added.

The Bluetooth SIG has more than 1,900 members and is due to meet next Monday in France. An earlier issue relating to Bluetooth and military spectrum in France was resolved last month, according to Janson.

Janson described himself as "very curious" to see how Bluetooth rolls out worldwide. He expects that in Europe, Bluetooth will initially feature most strongly in cell phones. Given the stringent legislation in some European countries related to hands-free driving, Janson thinks that Bluetooth-enabled headsets will prove popular as cheap alternatives to expensive car phone cradles. Under the right conditions, a driver could place a cell phone anywhere in the car and connect to it via the BlueCore product and a wireless headset.

Like Janson, Cahners In-Stat's Putscher noted that Europe's penchant for mobile phones might place the region as the main users of Bluetooth initially. "I would say that Bluetooth usage should pick up a little bit sooner in Europe because of high tri-band phone sales," she said.

In the U.S., Bluetooth is likely to catch on more in the PDA (personal digital assistant) market, Janson said. Turning to Asia-Pacific, particularly Japan, where both cell phones and PDAs are prevalent, the uptake of Bluetooth-enabled devices should be rapid, he added. The region's fascination with any kind of gadget will help as well.

In terms of BlueCore customers, CSR has already made several announcements. In June, the U.K. company announced that it had won an order from ALPS Electric Co. Ltd. (ALPS) with the Japanese electrical components manufacturer planning to use BlueCore in its Bluetooth module.

The two companies are collaborating on creating Bluetooth reference software stacks and software applications. With working prototypes of the ALPS module already tested, volume production should take place by year-end and will likely first be used by PC manufacturers looking to Bluetooth enable their hardware.

In addition, Alcatel SA recently worked with CSR to incorporate BlueCore01 into the battery ofthe French telecom equipment maker's OneTouch 700 GSM (global system for mobile communications) phone. Adding in Bluetooth technology will facilitate communication between cordless headsets and the phone, as well as between the phone and Bluetooth-enabled handheld, notebook and desktop PCs.

Tochigi Mitsumi, a Japanese manufacturer of electronic components also chose the CSR product as the basis for its upcoming Bluetooth module. Again, volume production is expected by year-end.

While Bluetooth is CSR's main current focus, the company is also significantly involved in the defining of the HiperLAN/2 standard, an upcoming wireless LAN (local area network) protocol and aims to have a HiperLAN/2 single-chip in the future, Janson said.

CSR, a spin-off from Cambridge Consultants Ltd. (CCL), already employs about 75 staff and plans to double that headcount by year-end. The company intends to establish its U.S. headquarters in Dallas, initially staffed by 15 application engineers, growing to twice that number by 2001, Janson said. CSR is also in the process of establishing an office in Japan, with five application engineers on board so far.

Intel Corp.'s investment arm, Intel Capital, invested an unspecified amount in CSR in February of this year.

"They've got the reputation of being a very savvy investor," Janson said. Aside from giving the U.K. company additional credibility in the market, the liaison with Intel has been helpful in terms of the advice the U.S. chip giant can provide CSR, he added.

CSR is currently "pre-IPO (initial public offering)," with plans to go public at some undetermined point, Janson said.

CSR, based in Cambridge, England, can be reached at +44-1223-424-167 or http://www.csr.com/. Cahners In-Stat Group, based in Scottsdale, Arizona, can be reached at +1-480-483-4440 or http://www.cahnersinstat.com/.

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