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802.16-2004 Certification: 2 Years Later
The first WiMAX-certified radios started appearing in Q1 2006. Two years later, what has been the impact in the market of having fully WiMAX-certified equipment? What has been the impact on volumes and equipment pricing? Has standardization kept its promises?
In a context where wave 2 of 802.16-2005 is proving difficult for multiple vendors to meet and for full testing to be accomplished on time, the importance of having certified products remains unclear. Do carriers care more about certification or product performance?
Who has certified equipment?
Judging from our regular interviews with vendors, not many agree on what to call a WiMAX radio, but there is no debate at least as far as what is a certified product. The following chart lists all the certified radios as of December 2007, as well as the dates of actual certification. Where equipment has been certified at various dates, we have indicated when it was first available.
In trying to assess the impact of certification, we have concentrated our vendor discussions on those who had certified equipment at least for a full year.
Volumes
Most vendors have reported increased volumes of certified products, starting in the second half of 2006. Between Q3 2006 and Q4 2007, the average growth of certified equipment ranges from 25% to 100% annualized. Those are quite impressive numbers, and most vendors report that 30% to 50% of RFPs now require vendors to include certified equipment. Over the same period, we see a steady decline in the sales of 3.5 GHz proprietary equipment, being replaced with standard equipment. The exception is SR Telecom, which has seen surprising growth of shipments for its proprietary Symmetry I. Serge Legris, VP Marketing, explained the phenomenon by the fact that Symmetry provides its customers very narrow channels (1 MHz) and small amount of spectrum (5 MHz or less), enabling them to serve more subscribers than with wider channels. However, SR Telecom foresees 2008 shipments to be dominated by its WiMAX-certified portfolio. Selex and Proxim also reported disappointing figures for shipments of certified equipment, which may be due partly to company and product positioning.
Redline claims it has shipped 1000 sectors since certification and over $35 million of certified products in 2007. Redline also has seen 147% growth of revenues between 2005 and 2007. Certification has resulted in cost reduction from 2 sources: higher volumes and greater efficiencies in the manufacturing process and design platforms.
Telsima is the only WiMAX-certified system vendor to sell only certified equipment. Thus shipments really started from zero, but grew impressively to more than 10,000 sectors shipped in 2007. CPE density per sector remains low, but should increase in 2008. Telsima is a good example of a vendor becoming successful in a very price-sensitive market while still differentiating on cost structure.
Aperto also indicated significant growth rates of certified equipment in the past 5 quarters, after a rather slow start Sales of rev d equipment started slowly in 2006 but picked up in the second half of the year.
Axxcelera also confirms that certification resulted in volumes increasing 25% from 2006 to 2007. Jerry Kollmann, VP sales, explained, “OFDM systems allowed coverage in areas not reached before, which is boosting demand.”
Chipset manufacturer Sequans is also bullish. Bernard Aboussouan, VP marketing, notes that shipments have tripled in 2007 compared to the previous year and that Sequans is now estimated to hold a 30% market share. Notable rev d customers include Telsima, Airspan, and Axxcelera. Aboussouan added that the increase in volumes has created manufacturing efficiencies with the involvement of ODMS in Taiwan on the CPE side, which along with standardization, allowed a 50% decrease in the bill of materials (BOM). Sequans expects shipments to increase by 5 times in 2008, most of it being 802.16e chipsets.
Interestingly, Sequans notes that no operator has deployed truly interoperable equipment in the field, that is, base station from vendor A operating with equipment from vendor B. This reality has been confirmed in our discussions with most other vendors who have certified products. Further, some vendors who interoperated 2 years ago have made software changes and upgrades that may or not allow interoperability today!
Bill of materials and pricing
The cost of a CPE is composed of various elements. Certification and standardization have had an impact on the cost of baseband and the RFICs. According to Sequans, the average cost (for large volumes) of a baseband has decreased from $35 in 2006 to less than $20 today. The cost of an RFIC was also cut in half from $20 in 2006 to less than $10 today.
Kevin Suitor at Redline added that each generation of standard brings a steady cost reduction. First came 802.16a with outdoor CPEs selling at $600, then 801.16d CPEs at $300, 802.16e CPEs at $250, and 802.16m CPEs that will sell at under $200.
From the system vendor perspective, Alvarion noted that the introduction of standard-based WiMAX chips into WiMAX CPEs (i.e., Intel Rosedale chip) provided a cost reduction of 40% on the CPE. Further cost reduction efforts allowed additional cost cutting, thus achieving an overall 55% cost reduction in 2007 compared with 2005. On the base station side, however, Alvarion failed to experience a major cost reduction because it is not WiMAX chip-based at this time. Alvarion is using high performance DSP+FPGA design.
Aperto agreed that the effects of price decline were felt deeper at the CPE level, with CPE prices roughly cut in half between Q1 2006 and Q3 2007, from $500 to $250-300 for outdoor CPEs. Price reduction is a result of greater volumes as well as ODM manufacturing improvements. Price declines in base stations were not as great, but still 10-15% per year with average price per sector in the $7,000-10,000 range for certified equipment and $9,000-12,000 for non-certified equipment.
What is next?
802.16-2004 has now a 2-year history with overall very positive effects of greater volumes and a drastic reduction of equipment cost and pricing, despite that the overall volumes are still relatively modest compared to the promise of mobile WiMAX.
The effects of 802.16-2005, despite possible delays, will certainly be more spectacular in terms of both volumes and equipment price decline, but the challenges posed by LTE or UMB will be equally great. More analysis and findings will be available in our upcoming report “WiMAX & Broadband Wireless (Sub-11GHz) Worldwide Market Trends 2008-2014 – 5th Edition.“
Happy New Year to all of you!!!
For more information you can contact the author. afellah@maravedis-bwa.com
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