Analyst: VoIP technology poised to take off

InStat/MDR says the market for VoIP integrated circuits will skyrocket over the next five years, largely because of increased corporate interest in VoIP and the expected arrival of converged wireless phones.

The latest research from In-Stat/MDR projects strong growth during the next five years for the technology underpinning VoIP.

The Scottsdale, Ariz.-based research firm forecasts that the market for VoIP integrated circuits will grow from $54.9 million in 2002 to $141.1 million in 2007.

Sam Lucero, an In-Stat/MDR analyst who recently authored a report titled "VoIP ICs: The Market Calls for Packet Voice," said he expects to see similar growth in chips for handsets, infrastructure products such as Internet Protocol private branch exchanges (IP PBXs), and carrier-oriented equipment.

While the market for IP-based voice systems will be outpaced by that for traditional systems for many years to come, IP-based systems nonetheless will see significant growth rates, Lucero said. He forecasts a compound annual growth rate of 20.8%.

Revenue for VoIP phone integrated circuits (IC) will grow from $15.6 million in 2002 to $49.6 million in 2007, Lucero said.

Texas Instruments Inc. dominates the market for all three chips, with about 80% market share, according to In-Stat/MDR.

One area that could be poised for significant growth is the market for phones that integrate both cellular connectivity and wireless LAN connectivity. Right now, that market is stalled because it is unclear whether carriers might subsidize the price of the handset, Lucero said.

Right now, the cost of cell phones is heavily subsidized by wireless carriers, but because Wi-Fi phones allows users to make much cheaper VoIP calls that circumvent the carriers' billing systems, it is unclear whether it would be to the advantage of wireless carriers or some other group to subsidize the cost, Lucero said.

While the U.S. market has seen growth in enterprise VoIP deployments, Lucero said, most of the growth in carrier-class chips has been in the Asian market, particularly in China, where the major carrier was split into two companies, Lucero said.

For enterprises, Lucero said, the main driver behind the deployment of VoIP is the ability to converge both voice and data onto a single network. Costs are beginning to come down, which is also aiding in growth, he said.

However, businesses and the industry still have to learn more about the role of converged devices. Just because a vendor can now put complicated data functions on a phone, that doesn't necessarily mean they should do so.

For example, many vendors want to include Internet-browsing capability on their VoIP handsets. But Lucero said handsets are often deployed on desks next to a PC, so that functionality adds needless complexity and expense to the devices.

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