The analog modem market may have peaked in 1998 and sales of chips for analog modems will decline significantly through 2002, according to a new report by International Data Corp. (IDC).
Digital modems operating at higher speeds will continue to replace analog ones, and the industry is moving to integrated, controller-less, and "soft" modems, the market researcher concluded in its study, "Worldwide Modem Semiconductor Market Review and Forecast, 1998-2002."
Growth in ADSL and cable-modem sales will help to advance the overall modem chip market -- however, with these modems shipping in small volumes now and ramping up in the later years of the forecast period.
IDC reported worldwide modem semiconductor revenue increased 3.8 percent to $1.2 billion in 1998. However, the compound annual growth rate (CAGR) from 1998 to 2002 for the overall modem chip market is likely to be flat at 0.2 percent.
The move to controller-less modems, the slowdown caused by the 56-kilobit-per-second standard battle, and telephone company and pricing issues for the digital modem market are all contributing factors to a flat modem-chip market, the researcher said.
"Competition in the marketplace is driving high levels of integration, which, in turn, is bringing down average selling prices," said Kimberly Funasaki, research analyst for IDC's Semiconductor Research program. "Broadcom is leading the cable-modem chip market, though Conexant and Libit should be able to secure themselves as second-source vendors."
IDC said it expects the strongest G.Lite modem chip vendors will be those that lead the V.90 modem chip market, including Conexant, Lucent, Texas Instruments, and Analog Devices, because of their ability to leverage an existing customer base.
Analog modem chips, led by V.90, still comprise the bulk of the total market revenue, with V.90 modems holding on as the highest revenue generators at least through 2002. In 1998, analog modem chip revenue rose to represent nearly 80 percent of total modem semiconductor revenue.
However, IDC said it expects their share will drop to less than 65 percent of 2002's market as ADSL modem chips (including full-rate and G.Lite) post a 1998 to 2002 CAGR of almost 150 percent, and cable-modem chips post about 50 percent growth.
Within overall analog modem chips, IDC said it predicts V.90 will peak this year, causing the total modem-chip market to peak as well, at $1.3 billion -- a moderate 2.3 percent year-over-year growth. Chip integration and modem average selling price pressures will remain factors in lowering overall revenue, Funasaki said.