Hope on the DSL horizon

The success of the Digital Subscriber Line (DSL) chip market in 2001 was tame in comparison to that of 2000, according to Cahners In-Stat Group.

A significant drop in average selling prices driven by intense competition between manufacturers, deployment delays on the part of Competitive Local Exchange Carriers (CLECs) and Original Equipment Manufacturers (OEMs), and a slew of cancelled orders toward the end of 2000, resulted in a gross oversupply of DSL Integrated Circuits (ICs) in 2000 and leading into 2001. ‘2001 was a corrective year for the DSL IC market,’ says Mike Wolf, a Director with the market research firm. ‘After 2000, in which unprecedented growth led to a $1.2 billion market, 2001 was plagued by excess chip inventory in the US. However, as numerous CLECs went out of business and OEMs have written off inventory, with some deciding to exit the market altogether, this situation has corrected itself.’ In-Stat predicts hope on the horizon for the market. The strength of emerging Asian and European DSL markets in 2001 has enabled DSL to remain a successful business for several DSL IC and equipment companies.

DSL IC vendors are also evolving to integrate more functional blocks into their solutions, meeting an increased demand from their customers for both home networking and Voice over Packet capabilities. ‘Moving forward, DSL IC manufacturers cannot stand still. They must provide additional technologies to their DSL chip portfolios in order to remain competitive,’ says Wolf. In-Stat also found that in 2002, both revenues and port shipments are expected to increase, driven by such factors as increased deployment of remote Central Office (CO) equipment, expanding regional markets including Europe, China, Korea and Japan, and improvements in technology enabling faster deployment and lower expenses.

Also, prices for chips are expected to continue to fall throughout the next 4 years. Despite increases in port shipments, revenues also end up falling from 2003, such that DSL IC revenues experience a compound annual growth of -11% from 2001 through 2005.2001 marked aggressive action by vendors, as many expanded into new markets such as VDSL and SHDSL. One of the most significant market events was the announced merger of DSL IC giant Globespan and communications processor specialist Virata.

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