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Intersil Corp Strategy Case Study
1. University of Michigan Business School February 22, 2002
Intersil Corp: Controlling the Wireless Value Chain
It was a cold winter morning and John was glad to be in the warmth of the student lounge at the
University of Michigan Business School. He had just wrapped up an important meeting with a
group of visiting executives from a small startup company discussing their entry strategy into the
U.S. market. At one point in the meeting he felt he was losing his audience, but with some
extempore research on the Internet, he had quickly found the exact data needed to win over his
clients. "This wouldn't have been possible without the campus-wide wireless local area network
(WLAN) the school boasts," he thought. WLANs involved a lot of technology, but driving it all
was a small Integrated Chip design firm based in Irvine, California — Intersil Corporation.
Introduction
When Intersil was founded in Cupertino, California in 1967, it was one of the first analog
semiconductor companies in the world. Since then, the company has gone through many
transformations and several name changes, but remained a leading semiconductor manufacturer.
In 1983, Intersil was purchased by General Electric and integrated into GE's Solid State division.
GE Solid State was purchased by Harris Semiconductor in 1988, and merged with its existing
Harris Semiconductor unit, headquartered in Palm Bay, Florida.
Over the next 10 years, Harris Semiconductor focused its expansion on the development of
analog and mixed-signal integrated circuits (ICs) for signal processing, power management, and
radio frequency (RF) applications. With the introduction of their first generation PRISM WLAN
chipset, Harris began its journey toward dominance of the WLAN market.
In 1999, Harris Corporation sold its semiconductor division to the Intersil Holding Company,
marking the reemergence of Intersil as an independent corporation. Intersil's TO in February
1
This case was written by MBA candidates Jonathan Chizick, John Gearty, and Srini Venkat under the supervision of
Dr. Allan Afuah, Professor of Corporate Strategy at the University of Michigan Business School. This case is
intended as a basis for class discussion rather than to illustrate either effective or ineffective handling of an
administrative situation.
2. Intersil: Controlling the Wireless Value Chain
2000 raised $575M, making it the largest ever for a U.S. semiconductor company. Later that
year, Intersil returned its headquarters to California.
Since becoming a public company, Intersil had undergone numerous transformations, including
focusing their product lines, exiting businesses, and acquiring and partnering with
complementary technology providers. In 2001, they had over 60% market share in the WLAN
chipset market, revenues of $481.1M, and gross margins of 35%. Exhibit 1 shows Intersil's
2001 financial position.
Wireless LAN 101
Wireless LANs had been in existence since the 1970s when IBM, HP, and Motorola
experimented with Infrared and low bandwidth RF signals to create local area networks.
However, it wasn't until early 2000 that WLAN gained popularity. Initially, serious concerns
regarding lack of standards, security, and scalability diminished the mass appeal of WLANs. To
address these concerns, the IEEE (Institute of Electrical & Electronics Engineers) committee for
WLAN standards was created in 1990. Approval of the 802.11b standard for WLAN in 1997
was an important milestone that precipitated the frenzied growth in Wireless LANs. The speed
of the 802.11b products improved steadily from 1 Mbps in 1997 to 11 Mbps in 2000. In 2001,
the IEEE approved the next generation of WLANs — the 802.11a standard, which increased
transmission speeds to 54 Mbps.
Wireless LANs used electromagnetic airwaves (radio and infrared) to communicate information
from one point to another without relying on physical connections. In a typical WLAN
configuration, a transmitter/receiver (transceiver) device, called an access point, was connected
to a wired network from a fixed location using standard Ethernet cable. Depending on the
application, an access point was connected to the Internet via a modem and/or a router. At a
minimum, the access point received, buffered, and transmitted data between the WLAN and the
wired network infrastructure (Refer to Exhibit 2). A single access point supported a small group
of users and functioned within a range of one hundred to several hundred feet. Most access
points also performed specialized functions including Dynamic Host Configuration,
authentication, and authorization. Specialized access points that extended the range of a master
access point were called "Bridges" since they bridged two or more networks. With the explosion
in the number of access point OEMs, access point prices fell steadily from over $2,000 in 1998
to under $250 in 2001.
End users accessed the WLAN through adapters called Network Interface Cards (NIC), which
were produced as PC cards for notebook computers, or internal adapters for desktop computers.
WLAN adapters provided an interface between the client network operating system (NOS) and
the airwaves. The nature of the wireless connection was transparent to the NOS. Typically, all
OEMs who manufactured access points also produced NICs. An 802.11b based MC sold for
about $100 at the end of 2001.
Wireless LANs provided multiple advantages over their wired counterparts. Key perceived
advantages were:
2
3. Intersil: Controlling the Wireless Value Chain
Mobility: Users could access the LAN from anywhere within a specified range.
Installation speed: The lack of wires eliminated the complexity associated with stringing
cables across rooms, floors, and between buildings.
Reduced cost of ownership: Life-cycle ownership costs were estimated to be much
lower, especially in environments where frequent moves were necessary.
Scalability: Increasing the size and range of Wireless LANs could be easily
accomplished by adding additional access points.
The adoption of a common standard was critical to drive mass-market penetration. This was
clearly evidenced in the development of CDs, DVDs, VCRs, and Personal Computers. The
802.11 standard was expected to foster competition, which in turn was expected to simulate
demand by driving down prices. Analysts estimated WLAN sales to grow to 35 million units by
2005, which represented a CAGR of 70%. 1
Competing Technologies
In the WLAN space, Intersil faced competition from both competing open standards, and
proprietary technologies. Two examples are discussed below and a comparison table is included
in Exhibit 3.
HomeRF Standard
HomeRF was launched in 1998 after being developed by the Home Radio Frequency Working
Group (WG). This group began with five members and has since grown to over 50, including
Compaq, Siemens, and Motorola. 2 Intel was one of the early members, but in March of 2001
withdrew when it shifted strategies to support the 802.11 standard. The negative repercussions
from this defection raised serious doubts about the prospects for HomeRF. 3 However, in January
2002, AT&T's Consumer Division announced membership in the WG and their support for
developing WLANs using HomeRF technology. Although it lagged 802.11 in market
penetration, it appeared HomeRF would continue to push forward with their standard.
HomeRF was designed as a wireless home networking protocol to connect PCs, peripherals,
cordless phones, and other consumer devices. It included support for data, voice, and streaming
multimedia. HomeRF products operated in the same open spectrum as 802.11 (2.4 GHz) and
utilized frequency-hopping spread spectrum RF technology. Although initially limited to
transfer speeds of 1.6 Mbps, HomeRF 2.0, released in late 2001, increased speeds to 10 Mbps.
1 Adams, Harkness, Hill, "Semiconductor Devices Monthly," Analyst Report Dec. 2001: 4.
2 HomeRF. 14 Feb. 2002 <http://www.homerf.org/about/faq_general.html >.
3 Wong, Wylie, "Intel backs rival wireless home computing," CNET News 20 Mar. 2001. 14 Feb. 2002
<http://news.com.com/2100-1033-254430.html?legacy=cnet >.
3
4. Intersil: Controlling the Wireless Value Chain
The HomeRF standard offered some technical advantages over 802.11. Because HomeRF
integrated voice support, unlike 802.11, it was able to offer toll-quality voice service. This
quality of service (QoS) for voice also meant higher reliability for data transfers. 4
However, HomeRF had several disadvantages relative to 802.11. The first was speed. The latest
version of HomeRF was limited to a peak data transfer rate of 10 Mbps, versus 11 — 54 Mbps for
the various versions of 802.11. Another disadvantage was the virtual non-existent penetration of
HomeRF in enterprises.
Future plans for HomeRF 3.0 included a speed upgrade to 25 Mbps, which could support
streaming video of at least DVD quality. The HomeRF Working Group expected to see broader
use of HomeRF in TV set-top boxes, video tablets, and multimedia servers. 5 HomeRF 3.0
devices were expected to be available late 2002. 6
Other Proprietary Networks
Unlike 802.11 and HomeRF, Metricom attempted to build out a high-speed wireless data
network, called Ricochet, using a unique, proprietary, microcellular data network technology.
Unlike a LAN, Ricochet was designed for wireless access to email and the Internet, and only
contained limited file sharing capabilities. However, the network could be configured to allow
users access to their corporate LAN. This network required installation of approximately five
MicroCell radios for every square mile of coverage desired in urban areas. As of 2001, the
network provided limited availability of 128 Kbps Internet access, however many areas were
limited to 28.8 Kbps access speeds. Small radio transceivers were usually mounted to streetlight
or utility poles. Customers were required to purchase or lease a proprietary modem ($99-$299)
to enable access.
The first system launched in 1995 utilizing unlicensed bandwidth. However, unlicensed
bandwidth provided limited transmission range. With an aggressive strategy to rollout Ricochet
to 46 metropolitan areas, Metricom was forced to purchase licensed bandwidth in the 2.3GHz
spectrum.'
With a massive investment of $500M from investors such as Paul Allen and WorldCom,
Metricom was able to install 16,000 transmitters in 14 states by 2001. However, at an average
charge of $75 per month, Ricochet was only able to sign up 51,000 subscribers at that time.
With mounting debt and slow revenue growth, the company was forced to file for Chapter 11
bankruptcy protection and shut down the system in August 2001.
4 HomeRF. 14 Feb. 2002 <http://www.homerf.org/about/faq_general.html >.
5 Ibid.
6 HomeRF Working Group, "Wireless Networking Choices for the Broadband Internet Home", 2001.
7 Orenstein, David, "'RF' Means 'Real Fast'," Business 2.0 12 Dec. 2000: 108.
4
5. Intersil: Controlling the Wireless Value Chain
On August 16, 2001, Metricom held an auction for their remaining assets. Aerie Networks won
the bidding and acquired the assets for $8.25M. As of February 2002, the company was still in
the process of analyzing, on a market-by-market basis, whether or not to resume service. 8
Wireless LAN Value Chain
By 2001, the telecommunications segment had emerged as a critical end-user market for
semiconductor manufacturers by commanding over 25% of the entire market. A significant
portion of the growth in this area came from the large infrastructure build-outs driven by the
exponential growth in Internet adoption and moves toward a complex networked economy.
Communications-focused chipmakers, such as Texas Instruments and Toshiba, reaped the
benefits and saw their profits skyrocket. By the late 1990s, the sophistication of technologies
called Digital Signal Processing (DSP), led to development of high-speed wireless
communication equipment. Most industry analysts agreed the DSP market segment would
outpace the rest of the semiconductor market by 2004.
The Wireless LAN industry attracted a large number of varied participants to create a broad
value chain. Players ranged from small startups to Fortune 100 companies. This explosion in
growth was largely fostered by the development of high-speed semiconductor chipsets from
companies such as Intersil. Exhibit 4 shows the Wireless LAN value chain flow. Exhibit 5
details the players in the value chain and highlights the different roles of each player.
Integrated Chip Design and Manufacture
The Wireless LAN space was one of the few bright spots in the semiconductor industry in 2001
and experienced phenomenal growth. In 2001, 7 million WLAN chipsets were shipped -- double
the volume of 2000 shipments 9.
Depending on the manufacturer, a WLAN chipset contained as few as three or as many as five
separate chips. Wireless LAN chip design required expertise in three complex areas — Radio
Frequency (RF), DSP, and Power Amplification. Although the communication protocol was
standardized, ICs firms typically patented the internal designs of WLAN chips. Some companies
chose to focus on one or two components and licensed their designs to other IC manufacturers.
For instance, Icefire Inc., a small startup firm, focused solely on power management designs.
Others such as Intersil and Agere supplied the complete radio solution. IC manufacturers selling
to OEMs typically differentiated their products based on speed, power consumption, and
performance.
Intesil and Agere Systems enjoyed duopoly power in the WLAN chipset market with a 60/40
split in market share respectively. Agere and Intersil differed considerably in their business
models. While Intersil sold open platform WLAN chipsets that could be used in any OEM
8 Charny, Ben, "Plotting the revival of Ricochet," CNET News 1 Feb. 2002. 15 Feb. 2002
<http://news.com.com/2009-1082-827946.html >.
9Adams, Harkness, Hill, "Semiconductor Devices Monthly," Analyst Report Dec. 2001: 2.
5
6. Intersil: Controlling the Wireless Value Chain
design, Agere opted to vertically integrate into an OEM. Until 2001, Agere's chipsets were
available only for use in Agere OEM products. Intersil's open platform model led the company
to sell to a multitude of OEMs. Exhibit 6 shows a list of OEMs who manufactured products
based on Intersil's chipset. However, in 2001 Agere initiated a move towards a more open
architecture chipset solution model.
Intersil introduced its first product, called PRISIM, in 1996 and had been on the leading edge of
technology development ever since. After late 2000, there was rapid growth in the number of
firms offering Wireless LAN chipsets, including big names such as Philips Electronics NV,
Texas Instruments, Amtel Corporation, and RF Micro Devices. Growth in the core WLAN
chipset industry also fostered expansion in the production of complementary components such as
filters, switches, and antennas. A few lesser-known companies, such as Microsemi Corporation
and Alpha Industries, specialized in "off-chip" WLAN components. At the time of this case
writing, over 20 firms offered WLAN chipset solutions, i° and overall more than 70 companies
served the Wireless LAN components industry.
The late 1980s saw a trend in the semiconductor industry toward outsourcing of the
manufacturing process. Some firms even chose to focus on semiconductor design and
completely outsource manufacturing. Such companies were known as "fabless" design firms.
The firms that focused on manufacturing were called Contract Manufacturers (CMs). With the
increasing complexity of the chip fabrication process, fixed costs were increasing dramatically.
In 2002, the cost for fabrication equipment was estimated to reach over $6B. 11 In order to justify
such huge investments, manufacturing operations needed large production scale. Contract
manufacturers, by aggregating demand, were able to create this scale.
An interesting fall-out of the move towards outsourcing was the emergence of the "Silicon
Valley of the East" — Taiwan's Hsinchu Science Park. A government-led strategy to capitalize
on the explosion in semiconductors led to the creation of the IC fabrication company, UMC.
Soon a second fabrication company, TSMC, was created by a joint venture between the
Taiwanese government and the Dutch company, Philips. By the end of 1996, there were more
than 60 IC firms in Taiwan, of which 20 firms had the capability to fabricate ICs.
The approval of standards other than 802.11b, such as 802.11a and Bluetooth, led to the
emergence of a whole new class of semiconductor companies. These firms were typically
fabless companies, and specialized in integrating different standards into one chipset. In late
2001, LinCom Wireless, a fabless IC design firm, introduced ComboLinkTM, a chipset compatible
with both 802.11a and 802.11b standards. Mobilian, another fabless design firm, announced the
release of TrueRadioTM, an integrated design that could interoperate with both 802.11b and
Bluetooth standards. Analysts predicted this niche to be a high-growth area.
1° USB Warburg, "Wireless LAN Industry," Global Equity Research Report, 24 Jan. 2002: 3.
II Industry Surveys, Semiconductors, Standard & Poors, 3 Jan. 2002.
6
7. Intersil: Controlling the Wireless Value Chain
Original Equipment Manufacture
Most WLAN chips were sold to telecom original equipment manufacturers (OEMs) — companies
that manufactured a variety of telecommunications equipment. Semiconductor manufacturers
worked closely with their prospective customers in designing their chips. This practice fostered
close relationships, repeat business, and ensured a market for the chips. As chips became more
complex the process became more important. Typically, large OEMs outsourced the physical
manufacturing, choosing instead to concentrate on marketing and brand management.
Growth of outsourcing in the wired telecommunications market led to the emergence of a
number of contract OEMs in countries like Taiwan and Korea. These OEMs focused on
manufacturing automation and mass production for multinational companies. With the growth in
the WLAN market, these OEMs diversified into WLAN products, emerging in 2001 as the
largest supplier. The Market Intelligence Centre estimated Taiwan alone accounted for 68% of
the 2001 worldwide network interface (MC) card supply and 33% of the access point supply. I2
Exhibit 7 details the global WLAN vendors and their Taiwanese contract manufacturers.
Gradually, these offshore manufacturers developed basic research and development capabilities
and began to engage in a process called Original Design Manufacturing (ODM). In these cases,
a customer gave the ODM product parameters and allowed the ODM to design the system,
source the components, and build the product. The ODM concept became popular in the
manufacture of WLAN products. By the end of 2001, there were more than 30 companies in
Taiwan engaged in ODM of access points and NICs. The combined production capacity reached
over two million units per annum. These Taiwanese manufacturers dramatically influenced the
industry landscape, providing worldwide retail vendors with cost-effective solutions.
Another notable trend in the Wireless LAN industry was the race between PC manufacturers to
integrate Wi-Fi capabilities into their products. This was seen as a value added feature, and by
2001 8.6% of PCs manufactured included this option. Since Taiwan accounted for 57% of all
laptops manufactured in 2001, the WLAN OEMs in Taiwan were considered to have an edge in
tapping this market. ° It was also widely believed that by 2005 most home office electronic
equipment would incorporate WLAN capability. Printer manufacturers like Epson were quick to
release print servers using WLAN connectivity. Other popular applications in development
included TV set-top boxes, gaming equipment, and audio & video equipment.
WLAN Software
Most OEMs supplied custom software and drivers for their WLAN products. There were three
types of WLAN software required — (1) Firmware, which controlled the internal logic of
programmable chips within the equipment, (2) Services software, which enabled the equipment
to provide standard services such as HTTP, DHCP, and SMTP, and (3) Management and
configuration software that allowed implementers to configure the Local Area Networks.
12 USB Warburg, 1.
13
USB Warburg, 4.
7
8. Intersil: Controlling the Wireless Value Chain
Firmware was specific to the IC chipset used, and was developed and provided by the IC
manufacturers. The Services and Management software was usually developed by OEMs and
supplied along with the product. OEMs often viewed software as a source of differentiation, and
advertised products based on the simplicity of software configuration and use.
A few companies, such as Wavelink, Funk Software, and NetMotion, offered customers
specialized software that provided extended functionality for security, mobility, and network
management. The software giant, Microsoft, included WLAN support in its Windows XP
release and added further value by incorporating the 802.1x security standard. This move was
expected to further boost WLAN adoption by making it simpler for consumers to move between
office and home networking environments.
Equipment Distribution
The distribution of wireless products remained highly fragmented due to the speed of technology
evolution in the industry. The emergence of the Internet was also considered a competitive
threat to distributors. Most distributors relied upon relationships with suppliers and customers as
the key to success. A typical national distributor held over 20,000 products in inventory. The
size and accessibility of the product database was also considered critical for success. The
follow quote from TESSCO — a national wireless equipment distributor — summarizes the
industry dynamics. (Excerpted from TESSCO's 2001 10K filing)
"The emerging wireless communications distribution industry is fragmented and is
comprised of several national distributors, such as Hutton Communications, Cellstar,
Brightpoint, Sprint North Supply, Anixter, Westcon, Comstor and Wincomm and
numerous regional distributors. In addition, many manufacturers sell direct. Barriers to
entry for distributors are relatively low, particularly in the subscriber accessory market,
and the risk of new competitors entering the market is high ... Continuing changes in the
wireless communications industry, including risks associated with conflicting technology,
changes in technology and inventory obsolescence, could adversely affect future
operating results. In addition, the Company views the rapid expansion of Internet
technology as a positive business opportunity; however, this technology and evolving
Internet business models could also present additional competitive pressures and
challenges to the Company ... the Company believes it differentiates itself from its
competitors based on the breadth of its product offerings, its ability to quickly provide
products in response to customer demand and technological advances, the level of its
customer service and the reliability of its order fulfillment process."
End Customers
Wireless LANs served two distinct segments:
Corporate Customers: Wireless LAN was seen as a strong alternative for traditional
wired LAN within corporate environments. With speeds of 11 Mbps, the WLANs
compared favorably with wired LAN performance. Additionally, the lower cost of
ownership was a strong argument for this segment. Surveys conducted by Microsoft in
8
9. Intersil: Controlling the Wireless Value Chain
2001 indicated over 40% of all businesses in the U.S. had a wireless network and over
18% intended to deploy wireless networks by 2003. An overwhelming 83% of these
wireless installations were based 801.11. 14 The survey also indicated the chief concern
among these customers was information security.
Home Use: Traditionally, the wired network within homes was not very popular.
However, the home segment was expected to outperform the corporate segment in
Wireless LAN adoption. The increase in number of "multiple PC" homes, laptop usage,
interoperability between work and home networks, simplicity of setup, the move by large
broadband cable vendors to support Wireless LANs, and the competitive pricing of
WLAN gear were key factors driving adoption.
WLANs made major inroads into global emerging markets. With a pent up demand for Internet
connectivity, and traditionally low reliability of existing telephone wires, these markets offered
lucrative opportunities for Wireless LAN deployment. Increasingly, Wireless LANs were used
in these markets to establish point-to-point connectivity between villages and towns.
Support and Solution Providers
During the initial phases of the Wireless LAN industry, support and services were provided by
the major OEMs. Companies like Symbol Technologies, Intermec Corporation, and Proxim
provided packaged solutions. However, pure-play firms that specialized in service soon
emerged. These firms focused on providing tailored solutions to industry verticals. The top four
verticals included Education, Government, Manufacturing, and Healthcare. Exhibit 8 shows the
relative sizes of the verticals. Some vendors like Raylink and Alvarion provided Wireless ISP
services based on point-to-point and point-to-multipoint WLAN technologies. With the stability
of an established industry standard and the cost-effectiveness of an unlicensed, high-volume
approach, these solutions provided attractive high-bandwidth solutions where wired access was
not feasible. On the consumer side, major broadband providers like AT&T began to support
home WLAN networks.
A major growth area for WLAN services was the provision of public access in "hot-spots" such
as airports, hotels, cafes, and convention centers. An entire industry had emerged to cater to
mobile users, with incumbent ISPs and entirely new players competing to setup hot-spot
networks. Different business models including aggregation, ownership, and account
management emerged, none of which were gaining overwhelming acceptance. The most well-
known players included MobileStar, Wayport, and Boingo.
By the end of 2001, most universities offered courses in Wireless LAN technologies and
applications. Planet3Wireless offered training programs, such as CWNE certification, for
professionals interested in careers in Wireless LANs.
14
Microsoft, WECA, "Wireless LAN Research Study," October 2001.
9
10. Intersil: Controlling the Wireless Value Chain
Wireless LAN Organizations
Wireless Ethernet Compatibility Alliance (WECA)
WECA was formed as a non-profit organization in early 1999, to fill the need for an independent
body to certify inter-operability of 802.11 products. This organization also promoted the global
Wi-Fi standard with its prominent trademark logo. WECA participated in worldwide
conferences and trade shows to actively promote the Wi-Fi standard. The initial founding
members included 3Com, Cisco Systems, Intersil, Agere Systems, Nokia, and Symbol
Technologies. By end of 2001, WECA had a membership of 110 companies.
WLAN Alliance (WLANA)
The Wireless LAN Association was a non-profit educational trade association, comprised of the
thought leaders and technology innovators in the local area wireless technology industry.
Through the vast knowledge and experience of Sponsor and Affiliate members, WLANA
provided a clearinghouse of information about wireless local area applications, issues and trends,
and served as a resource to customers, industry press, and analysts.
Wireless LAN Competitors
Atheros
Intersil's primary competitor in the 802.11 IC market was Atheros Communications. Atheros
was founded in May 1998 by experts in radio and signal processing from Stanford University
and the University of California at Berkeley. Unlike Intersil, Atheros was a fabless
semiconductor manufacturer, outsourcing manufacturing to companies such as Taiwan
Semiconductor. Atheros specialized in chipsets for the 802.11a WLAN standard, which could
transmit data at speeds up to 54 Mbps. The "a" standard used the 5 GHz spectrum, thereby
eliminating the interference problems cropping up for "b", which operated in the crowded 2.4
GHz range. See Exhibits 3 and 9 for comparisons between 802.11a and 802.11b. Despite the
apparent technological advantages, "a" had three major disadvantages. First, "a" chipsets used
significantly more power thus reducing battery life in laptops and handheld devices. Second,
unlike 2.4 GHz, the 5 GHz spectrum was not unlicensed worldwide. It was unavailable in Japan,
and in Europe a competing standard, HiperLAN2, was beginning to build momentum. Finally,
"b" had a significant head start in building network externalities. Since "a" products lacked
backward compatibility with the popular "b" products, it remained an open question as to
whether or not users would be willing to switch.
Mobilian
Intersil also faced competition from companies, such as Mobilian, which were developing single
chipsets combining 802.11b functionality with Bluetooth and/or 802.11a. Despite the added
cost, if successful, these products would offer users backward compatibility, which could induce
switching to a competing technology.
10
11. Intersil: Controlling the Wireless Value Chain
Former executives and scientists from Qualcomm, Intel, Ericsson, and other wireless technology
companies founded Mobilian in February 1999. Mobilian was a wireless systems company that
developed chips, software, and reference designs to seamlessly support multiple wireless radio
standards. Their first product, TrueRadioTM, was designed as a single chipset combining 802.11b
and Bluetooth functionality. This was considered a technological breakthrough, as both 802.11b
and Bluetooth operated in the 2.4 GHz spectrum, and had potential significant interference
problems when operated in nearby spaces. However, as of March 2002, the development of
TrueRadioTM was almost 12 months behind schedule and quickly losing ground to competitors
such as Intersil, with its Silicon Wave partnership. Future products were planned to integrate
802.11a and 802.11g functionality with chipsets that would also contain WWAN (Wireless Wide
Area Network) connectivity, such as 3G and cellular.
Intersil Strategy
New Business Model — Wireless IC Kits
As part of a strategy to gain control within the value chain and add value above and beyond IC
design and manufacturing, Intersil began bundling its microchips with complete "IC Kits."
These kits included reference designs, software, firmware, and hardware for its wireless ICs. In
essence, this included all an OEM would need to begin manufacturing wireless access points or
transceivers. This served to remove power from major OEMs by eliminating the investment
required to enter the wireless OEM market. It spurred the proliferation of Taiwanese
manufacturers who no longer needed to invest in developing their own designs. They could
simply purchase an IC Kit from Intersil and begin manufacturing with only minor customizations
to the design. This had the effect of reducing OEM power and allowing Intersil to negotiate
higher prices for its chips.
IC kits also gave Intersil a competitive advantage by packaging a fully tested solution for its
customers and spreading the cost of design development over a number of customers. Unless
OEMs preferred to create designs from scratch or purchase firmware and software from other
companies, they would elect to use Intersil's complete kit. Intersil continued to increase its value
to customers by providing white papers, reliability and testing processes, and a knowledge base
of common design information. Moreover, these tactics increased interoperability of 802.11
products, thereby promoting acceptance of the standard.
Strength in Alliances
Intersil formed several alliances both upstream and downstream in their value chain to promote
usage of 802.11 technologies. In addition, they partnered with competitors to develop products
compatible with opposing technologies.
Although Intersil developed much of their technology internally, they had invested in technology
suppliers with outside expertise. In August 2000 they partnered with Sygate Technologies to
develop dynamic IP addressing software that integrated seamlessly with Intersil's PRISM
chipset. This software solution made it both faster and easier for customers to setup a wireless
11
12. Intersil: Controlling the Wireless Value Chain
network. In May 2000, Intersil acquired No Wires Needed (NWN), a leader in developing
wireless infrastructure products such as security software solutions. Similar to the Sygate
partnership, this acquisition gave Intersil rapid access to technologies that complemented their IC
products.
Looking to the future, in October 2000 Intersil acquired SiCOM, a fabless semiconductor
manufacturer specializing in broadband modem silicon products for high-speed wireless
networks (>100 Mbps). This acquisition was designed to give Intersil the capability to develop
faster chipsets as wireless networking speeds continued to grow.
Intersil acquired a wide range of customers for their PRISM WLAN chip set, including industry
leaders such as Alcatel, Cisco, Compaq, 3Com, Dell, H-P, IBM, Intel, Nokia, Nortel, Panasonic,
Samsung, Sharp, Siemens, and Sony. The strength of these brand names gave credibility to
802.11 in the marketplace, thus fueling customer adoption of the technology. Intersil's
relationship with customers, such as Intel, was a partnership to expedite the deployment of both
current and future 802.11 wireless technologies and products. For example, Intel integrated
Intersil's Prism 2.5 chip set into their PRO/Wireless 2011B LAN products, which included PC
Cards, PCI adapters, embedded Mini-PCI cards, and USB modules.
Intersil was also open to partnerships with developers of competing technologies, such as
Bluetooth. 15 For example, in November 2000, Intersil partnered with Silicon Wave, a leading
developer of Bluetooth chipsets, to create dual-mode (802.11b / Bluetooth) solutions in a single
product. 16
Developing a Focus
Intersil developed a strong focus on their PRISM business unit, which contained the company's
highest potential for growth, with an estimated 25% annual growth over the next four years.''
This new orientation was evidenced in its acquisitions and divestitures of non-core businesses.
In March 2001, Intersil's discrete power business was sold to Fairchild Semiconductor for
$338M, strengthening Intersil's cash balance to $600M. It then closed down its automobile
device segment, which was also not considered core. Intersil's acquisition of "No Wires
Needed" and SiCOM, provided designs and architectures that allowed manufacturers to
maximize network capacity, reduce costs, and reduce the "footprint", or amount of space
required on the circuit board. These acquisitions secured Intersil's position as a full- service
15 Bluetooth was a low-power, short-range (<30 ft.) radio interface standard. As of 2001, data transmission speed
was limited to 1 Mbps. It was designed primarily as a wireless interface between mobile phones and other wireless
devices, but had demonstrated potential as a wire replacement for many electronic devices. A Bluetooth Personal
Area Network (PAN) was created whenever two Bluetooth enabled devices came within a 30-foot range. The
devices did not need to be in line-of-sight and up to eight devices could be supported by one PAN. By overlapping
networks, up to 80 items could be linked. Bluetooth was pioneered by Ericsson in 1994 and standardized by the
founding members of the Bluetooth Special Interest Group (Ericsson, IBM, Intel, Nokia, and Toshiba) in 1998.
16 Intersil Corporation, "Intersil and Silicon Wave Co-Developing Bluetooth & 802.11b Dual-Mode WLAN
Solution," Internal press release, 28 Nov. 2000.
17 UBS Warburg, 12.
12
13. Intersil: Controlling the Wireless Value Chain
solution provider by giving its customers complete reference designs and components for
inclusion in IC Kits.
Internal Synergies
Several internal competencies made Intersil inherently well suited to become a leader in
designing and manufacturing wireless IC's. Intersil's other business units, although they
operated independently, contributed greatly to the success of PRISM.
CommLink, Intersil's product portfolio for analog communications, had expertise in VoIP
(Voice-over-IP) and Wireless Networking IC's for cellular base-station infrastructure. With the
addition of WLAN technology to VoIP, Intersil could develop chips for cordless telephones
based entirely on Internet protocols. Commlink also had expertise in analog and digital signal
processing which could be transferred to WLAN design and development.
Endura Power Management was another Intersil business unit that brought value to the
development of PRISM. Endura provided technology that decreased power consumption for
devices using microprocessors, including desktop computers, laptop computers, and handheld
devices. Endura products were used in roughly half of all devices containing microprocessors
from the two leading PC chip manufacturers — Intel and AMD. 18 Power management was also
critical to the success of WLAN technology. Early WLAN products consumed a great deal of
power, imposing large demands on batteries for laptops and handhelds.
As a result of these core competencies, Intersil quickly secured a technology advantage in IC's
for WLAN's. Its second-generation product, the PRISM 2, was five times faster, consumed half
the power, and had a smaller footprint than its predecessor. Subsequent chips exhibited similar
improvements in performance and size.
Strength in leadership
A strong team, consisting of intelligent and seasoned executives played a large role in the
success of Intersil's strategy. CEO Greg Williams was a veteran in semiconductors with 15
years at Motorola, where he became the Vice President of the Semiconductor Components
Group. Williams was the President of Harris Semiconductor, leading the Intersil spin out. He
immediately recognized the importance of focusing on core competencies and growth
opportunities, placing wireless, analog, and power management at the center of Intersil's
strategic direction.
Lawrence Ciaccia was Intersil's Vice President and General Manager of wireless networking.
Having led the engineering effort for the PRISM products and with over twenty years in
engineering at Intersil, Ciaccia understood the technical complexities of wireless ICs. More
importantly, he was actively involved in the ongoing efforts of the 802.11 IEEE and WECA
committees.
18 UBS Warburg, 5.
13
14. Intersil: Controlling the Wireless Value Chain
Standard versus Proprietary
Intersil began participating in the development of a WLAN standard with its involvement in the
IEEE Working Group for 802.11. Members of the working group, such as Intersil, had to vote to
ratify such a standard with 75% support. The original 802.11 standard allowed wireless data
rates of up to 2 Mbps and was co-authored by Intersil. In 1999, IEEE ratified 802.11b, which
became the market-accepted technology for Wi-Fi. 19 Intersil was a driving force in the design
and development of these standards, often contributing the majority of their content. Its
influence was challenged in the summer of 2001, when competitor Texas Instruments (TI)
lobbied passionately for acceptance of its own design in the specification of 802.11b's successor,
802.11g. Although TI's design was initially rejected, IEEE eventually combined designs from
Intersil and TI since Intersil also could not gain the required 75% acceptance. 2° Tentative
approval for the combined design was given in late 2001.
Intersil's early involvement in wireless organizations, such as WECA and IEEE, enabled them to
exert influence on the development of the new standards. As a founding member and current
board company of WECA, Intersil was able to drive standardization of WLAN products.
In addition to these two highly influential groups, Intersil had become an active participant in
numerous other industry standards organizations including the WLANA, Bluetooth Special
Interest Group (BSIG), HiperLan2 Global Forum, and Orthogonal Frequency Division
Multiplexing (OFDM) Forum.
Most companies held their technology secrets close to the vest, investing in patents and security
to prevent others from profiting from their innovation. Other companies rode the waves of
existing standards by building products dependent on them. Intersil had adopted the approach to
capitalizing on its technology leadership by effectively forcing its internal innovations to become
the standard. Intersil had achieved great success with this model, perhaps due to its extreme
confidence in engineering superiority and the unique nature of the WLAN market.
John looked at his watch. It was almost 11 am, and he had a class in 10 minutes. As he got up
and walked to his classroom a lot of questions popped into his mind. He had just advised his
client on patenting their technology. However, Intersil was pushing towards standards based
products. In fact, they were co-developing standards with other competitors. Yet, Intersil
seemed to be doing very well. Was this a good strategy? Was there something in the wireless
industry that favored standards? Having followed the standards path, how would Intersil
maintain their competitive advantage? How much impact did Intersil have on the wireless value
chain? He understood that the value in a value chain shifted towards the players with power.
However, Intersil, although being a small player compared to giants like Cisco, Nortel, and
3Com, was able to control the Wireless LAN value chain. John wondered how. He knew there
must be something unique in Intersil's strategy, structure, and systems that allowed them keep
ahead of the competition. He just couldn't put his finger on it yet.
19 Network Computing. 14 Feb. 2002 <http://www.networkcomputing.com/1201/1201wsl.html >.
20
News.com. 14 Feb. 2001 <http://news.com.com/2100-1033-275940.html?legacy=cnet >.
14
15. Intersil: Controlling the Wireless Value Chain
Exhibit 1: Intersil Financial Statements
Intersil Income Statement
2000 and 2001
Year
2000 2001
Revenue
Product Sales $ 586.9 $ 481.1
Costs and Expenses
Cost of product sales 304.5 258.6
Research and development 84.9 106.1
Selling, general & administrative 119.7 93.5
Intangible amortization 20.8 44.2
In-process research and development 25.4
Impairment of long-lived assets 7.6
Restructuring 32.4
Other 1.2
Operating income (loss) 30.3 (61.3)
Loss on sale of Malaysian operation 24.8
Interest, net 11.3 (18.6)
Impairment on investments 8.2
Income (loss) before sale of certain assets
income taxes and extraordinary item (5.8) (51.0)
Operating results of certain operations
disposed of during 2001
Net sales 210.7 38.5
Costs and expenses (158.0) (41.4)
52.6 (3.0)
Gain on sale of certain operations 168.4
52.6 165.5
Income before income taxes and extraordinary item 46.8 114.5
Income taxes 29.1 62.4
Income (loss before extraordinary item 17.8 52.1
Extraordinary item - loss on extinguishment of debt, net of tax effect (31.4) (12.2)
Income (loss) before cumulative effect of a change in accounting principle (13.7) 39.9
Cumulative effect of adoption of SFAS 133, net of tax effect (0.2)
Net income (loss) (13.9) 39.9
Preferred Dividends (1.5)
Net income (loss) to common shareholders 15.4 39.9
15
16. Intersil: Controlling the Wireless Value Chain
Exhibit 1 (con't)
Revenue ($M)
Calendar Year 2000
Q1 02 03 04
Wireless Access $ 22.1 $ 29.8 $ 51.4 $ 59.8
Communications Analog $ 44.3 $ 54.3 $ 56.6 $ 51.8
Other Analog $ 51.3 $ 54.1 $ 58.1 $ 53.1
Discrete Power $ 53.2 $ 53.0 $ 52.5 $ 52.1
Total $ 170.9 $ 191.2 $ 218.6 $ 216.8
Intersil Balance Sheet
Year End 2001
Assets
Current Assets
Cash $ 601.4
Trade receivables, net 55.2
Inventories 67.9
Prepaid expenses and other current assets 14.6
Defered income taxes 33.8
Total Current Assets $ 772.9
Other Assets
Property, Plant & Equipment, net 140.1
Intangibles, net 241.1
Other 51.6
Total Other Assets 432.8
Total Assets $ 1,205.70
Liabilities and Shareholder's Equity
Current Liabilities
Trade account payables
Income taxes payable
Other accrued items
Total Current Liabilities
Other Liabilities
Deferred income taxes
Total Shareholder's Equity
$ 24.3
30.2
87.5
$ 142.0
6.5
1,057.20
Total Liabilities and Shareholder's Equity $ 1,205.7
Source: Intersil Web Site. 19 Feb. 2002 <http://www.intersil.com >.
16
17. Intersil: Controlling the Wireless Value Chain
Exhibit 2: Wireless LAN Architecture
Components:
1.Internet
2. Wireline Network
3. Modem
4. Access Point
5. USB/PC Card
6. Notebook
7. PCMCIA/PC Card
8. Specialized Bridge
9. Printer
SolvelT.com c/o MindMatrix. Inc.. @1998-2000
Exhibit 3: Overview of Wireless LAN Technologies
Band
Standard
IEEE 802.11 HomeRF Metricom
900 MHz & 2.4
GHz
2.4 GHz 5 GHz
802.11a
2.4 GHz
HomeRF 2.0802.11b 802.11g Ricochet
(proprietary)
Available
spectrum
83.5 MHz 83.5 MHz 300 MHz
Max data rate 11 Mbps 54 Mbps 54 Mbps 10 Mbps 175 Kbps
Throughput 5-7 Mbps 31 Mbps 31 Mbps 5 Mbps 128 Kbps
Range /
corresponding
data rate
100 m / 2
Mbps
TBD 50 m / 9
Mbps
45 m 300 m / 15 Kbps
(estimated)
Shipping Now Fall 2002 Now Now Re-launch TBD
Sources:
Benjamin Frankel, Fierce Wireless Intelligence Units, August 2001.
Martin Johnsson, "HiperLAN2 — The Broadband Radio Transmission", 1999.
Brad Smith, "Another Standard in the Wind," Wireless Week, 16 July 2001.
HomeRF Working Group, "Wireless Networking Choices for the Broadband Internet Home", 2001.
Aerie Networks. 18 Feb. 2002 <http://www.ricochet.com >.
17
18. 41
Fully Integrated Firms. E.g. Texas Instruments, Toshiba
Consolidated
110' 0 Fragmented
Traditional IC Firms. E.g. Intersil
1 r
Fab-less Firms
E.g. RF Solutions
ODM
r
Web Retailer
Distributor
Solution Provider
IC Fabrication
Equipment
Design
Service
Provider
Software
Development
Intersil: Controlling the Wireless Value Chain
Exhibit 4: Wireless LAN Value Chain
Semiconductor Value Chain Electronics Value Chain
...A... ...11/4....
-1,-- 1
Source: Our Analysis
ODM — Original Design Manufacture
OEM — Original Equipment Manufacture
VAR — Value Added Reseller
18
19. Intersil: Controlling the Wireless Value Chain
Exhibit 5: Wireless LAN Value Chain Players
Wireless LAN Industry Players
Value Chain Position ::.Mkt Seg
Comments
IICChipDesign
ChipManf.
OEMs/ODMs
PCs&Periph.
Software
Distribution
rr
>
WebRetailing
DirectRetailing
(Diagnostics
Training
Solutions
ServiceProv.
Consumer
Enterprise
Service
ICCHIPDESIGNERS
Toshiba X X X X X X X X X X X X Wi-Fl Laptops, Networking S/W
Philips X X X X X
Seiko Epson Corp (Japan) X X X X X Not much of WLAN focus
Global Communication Devices X X Wi-Fi Pureplay
Intersil Corp X X
Lucent Technologies X X X X
Mitsumi (Japan) X X Blueetooth Only
Motorola X X X X X
National Semiconductor X X X X X
Realtek (Taiwan) X X IC Designs
RF Micro Devices X X Specialize in RF chips and cards
Texas Instruments X X ACX100 Wlan Chip
Toko (Japan, US) X X Filters for WLAN Applications (Niche)
USI (Taiwan) X X Limited R&D Capabilities
Alcatel, France X X X X X X Proprietary Networks
AMD X X X X GSM devices, collaboration with Wavecom
Arescom, Inc. X X X X X Competence in DSL
Ericsson X X X X X X
Fijitsu (Japan) X X X X X X X X
TDK Semiconductor Corp X X X X No 802.11 portfolio yet
Amtel Corporation X c • Bluetooth Focus
Atheros Communications X Direct Competitor / 5GHz
Broadcom X X X : No WLAN; Bluetooth
Cirrus Logic X X Home & Multimedia Focus: 802.11e
Conexant, Inc. X X No WLAN.
Envara (Israel) X X X X 802.11a&b Chipsets
IceFyre Semiconductor X 5GHz Design Only
LinCom Wireless Inc X Combined 802.11a + b chipset
Mobilian X X X Trueradio: 802.11 + Bluetooth on one chipsi
Parker Vision X D2D Chip
Resonext Communications, Inc X Partnership with TSMC
RF Solutions X Fab-less IC Design House
Synad Technologies (UK) X 802.11a + b chip released
SystemonlC X
ContractManufacturers
Crewave (Korea) X X X X X X X A lot of expertise in Networks
Ambit Microsystems Corp. (Taiwan) X X X X Limited R&D Capabilities
Belkin Components X X X X
Askey Corp. (Taiwan) X X X
Asus (Taiwan) X X f X Competence in Cable Modems
Benq Corp. (Taiwan) X X Spinoff from Acer Comm. & Media
Bromax Communications (Taiwan) X X X
Delta Networks, Inc. (Taiwan) X X X X
EMTAC (Taiwan) X X X X
Gemtek (Taiwan) X X X X X
Global Sun Tech (Taiwan) X X
NextComm, Inc. X X X X Based on Intersil
Galtronics X _Wireless Antenas Only
19
20. Intersil: Controlling the Wireless Value Chain
Exhibit 5: Wireless LAN Value Chain Players (con't)
Wireless LAN Industry Players
Value Chain Position Mkt Seg.
ICChipDesign
ChipManf.
OEMs/ODMs
PCs&Periph.
Software
Distribution
VAR
WebRetailing
DirectRetailing
Consulting
cl'`DalaCl) E)
"c
I— 0
•S
I—
2
CO
o
ii)
. c2
Cn
hi
=
20
0
Comments
Q)
• .2
to
OriginalEquipmentManufacturers(OEMs)
k ..le X X X x III BB
HP
Com .aq
X
X
X X
X
X
X
EMI
El X
Son X X X Iff x 111
D-Link X X X X X 802.11a products
Ne •ear X X X • E3 X 802.11a •roducts
Tro Wireless X X X 11 X X , wireless • int n• and PDA •rintin•
A•ere S stems
Entras s
X
X
X
X
X
X
X
X X
X
X
ell
X
X MA`
X
Aretem (German X X X X II
Intel Co • X X • X X II. Xircom Wireless Cards
Links s X X • X Consumer Focus
Nomadix X X X 11 III X 131 Patented Securi S/W
Pison Teklo• ix X X X X III • X . 02.1Q Tech, Int rated Sol for SAP
Ricoh X X S X X .
Samsun. Korea X X U X X II
S•ectraLink X X X II Non Mobile Tel- • hone on 802.11b
2wire
Actiontec Electronics
X
X
X
X
El
•
X
X
IV
ELSA, AG German X X • El III
Sohoware X X • gi X 802.11b AP- $150
Cisco S stems X X X X X U X II
Intermec Cor• X X X X X II Wi-Fi Tablets
LG Electronics Korea X X X II X X 111
MMC Technol Inc (Korea X X III X X w
Nokia X X X El 13 X Mesh Technolo. Roof-to.
3com X X X X XU
C&S Microwave Ltd. Korea X X X Microwave Products Onl
Proxim X X III X X ll
Siemens X X X X ll We..ad Product
S mbol Tech X X 11 X X II Wireless Devices
AboCom S stems Taiwan X X ..
CC&C, Inc aiwan X 13 Wlan & Bluetooth
Colubris Networks Canada X El El X 13
Fine Di• ital Korea X II'
Hi.h Speed Surfi • Inc X • X III Modular Gatewa s
Hitron Technologies Inc (Taiwan) X X X li
Inventec A.. iances aiwan X Mi Emil Wireless k . . lances
1-0 Data Jap an X a 13 x II No WLAN
IP One, Inc Korea) X U1, X x is
K ocera (Japan) X X X Visual Phone
Liontech Korea X X X li No WLAN; DSUCable Products
Melco, Inc Ja•an Buffalo Tech X X Uses TI chi.
MiTAC (Korea) X • il
National Datacomm Co • aiwan X in
Nova Tech Korea X s X X
Pesi Taiwan) X X X 111,
RFTNC (Korea) X • In 1111 RF Devices
Senao aiwan X el X r Good Catalou•e
SMC Networks X II X X 111 802.11a • °ducts
To o•con Korea) X X X ill
Winmate (Taiwan) X III X X S•ecialize in Touch Screen, Some WLAN
Yamaha (Japan) X • X • in BT for interconnectin. Instruments
Z-Corn aiwan X X MI Uses Prisim Ch •st. External AP
20
21. Intersil: Controlling the Wireless Value Chain
Exhibit 5: Wireless LAN Value Chain Players (con't)
Wireless LAN Industry Players
Value Chain Position lev1kt Seg
Comments
ICChipDesign
ChipManf.
OEMs/ODMs
PCs&Periph.
Software
Distribution
VAR
WebRetailing
DirectRetailing
Consulting
TechServices
Diagnostics
Training
Solutions
Consumerr--
Enterprise
Service
PCMakers
IBM X XX X X — XX
Dell X X X X
Gateway X X X X
NEC X X X X
Acer X X X
Epson X X 802.11b Printer
Software
Wavelink X X X Systems S/W for Wireless Application Dev.
Funk Software X X X X X Radius S/W
iPass X X X X VPN S/W
Microsoft X X X X
Sniffer Technolgies X X X WLAN Sniffer
Distributers
TESSCO Technologies X XXXXX Wireless Focus - Good Solutions
Winncom Technologies Corp. X XXXXX Wireless arm ARC communications
Tech Data X X X X
Alternative Technologies X Value Added Distribution
Chipco Computer Distributers, Inc X
Connectronics X
D&H X
EMJ Data Systems (Canada) X
Gates Arrow Distributing X Financing
Ingram Micro X
VARs
Best Buy X X —
Circuit City X X
Compu Care X X
CompUSA X X
Micro Center X X
Staples X X X X X
WAV, Inc X X X X XXX
Alvarion (Israel) X X X X X Breezecom Products
OTC X X X X X Implementation Services In US & Japan
Fry's Electronics X X X X X ISP Services
WebRetailers
CDW X X
Computer Stop X
Tech Works X X
Warehouse X X
Wireless Central X X
Zones X X
.
c
—0
5
0
Excilan X X WISP Services
TTS Linx X X X X Installation, SME Service Plans
Niigata Canotec (Japan) X X Printing Solutions
NTT (Japan) X X
ServiceProviders
Sprint PCS X X X X
Connexion by Boeing X X Wireless Access on Airplances
GRIC Communications, Inc X X WISPs
Hereuare Communication, Inc X X WISP
Mobile Internet Services (Japan) X X
Service Factory (Scandinavia) X X .,, Provides Internet for WISPs
Telecommunication Services Inc (TS!) X X X Provides Telecom backend services.
Telia HomeRun (Scandinavia) X X Good Coverage in Scandinavia
Wayport X X
Woodside Networks X .,,, X Palo Alto - Under development
21
22. Intersil: Controlling the Wireless Value Chain
Exhibit 6: List of OEM Products Based on Intersil's PRISIM Chipset
PRISM Based Solutions
Hardware Suppliers
11 Mbps
WLAN ISA Cards
PCMCIA
Cards PCI Cards
Mini PCI
Cards USB Cards
Wireless P to
P Bridges
Voice Over
IP
Hardware
Access Point
Cable
Modern
AbsoluteValue Systems
Aironet x x x x xx
Applied Integration
Arkon Technologies x x xx
Compaq x x x x
DB Networks
EMTAC Technology
Eumitcom x x x x x x
Farallon x x
Fedtech Communications xx
GemTek x x x xx
GRE America
Inside Out Networks x x
Karinet x
Macnica x x x
Nanospeed x x x x
Neesus Datacom
Nokia x x x x
Nortel x x x
OTC x x x
Samsung x x x x x
Siemens x x x x x x x
Solectek x
Spectralink x
Symbol x
Toko x x x x x
TROY Wireless x x x x
Z-Com x x x x
Zoom Telephonics
Source: Intersil Company Website. 19 Feb. 2001 <http://www.intersil.com >.
Exhibit 7: Matrix of global WLAN vendors and their contract manufacturers in Taiwan
Global Vendor
Proxim
Market Share (%)
21
Shipments (K)
765
Contract Maker in Taiwan
Z-Com
Cisco 12 453 Accton, Ambit
Symbol 9 344 D-Link
Agere 8 295 USI
Linksys 6 206 Global Sun Tech,
BioMax Communications
Enterasys 4 159
3Com 3 115 Accton
Samsung 3 107
BreezeCom 3 100 Global Sun Tech
D-Link 3 99 Gemtek, Z-Com
Accton/SMC 2 90 Eumitcom
Nortel 2 63
IBM 2 57
Netgear 1 38 Delta Networks
Intel 1 34 Gemtek
Siemens 0 16 Eumitcom, Global Sun Tech
Others 21 773 Melco Technology supplied by USI
I-0 data Supplied by Gemtek
Source: IDC, USB Warburg estimates
22
23. State/Local Gov.
7%
Healthcare
9%
Federal Govemment
13%
Manufacturing
9%
Others
20%
Education
33%
Retail
3%
Insurance
3%
Legal
3%
Data Link Rale vs. Indoor Range
25 75 100 125 40 ZIS
Range (ft)
DataLinkRate
20
10
a
a IPIt 0
802.1 a
— 802.1lb
a a a
laa
Intersil: Controlling the Wireless Value Chain
Exhibit 8: Wireless LAN Industry Adoption
Source: Wireless LAN Research Study, WECA & Microsoft, Inc., October 2001.
Exhibit 9: Comparison between 802.11b (Wi-Fi) and 802.11a
Source: James C. Chen Ph.D. and Jeffrey M. Gilbert Ph.D., "Measured Performance of 5-GHz 802.11a Wireless
LAN Systems," (August 27, 2001): 4.
•
23