DSL modems

	Aztech of Hong Kong has released the DSL1215FUN-DH, a combo VDSL2 and ADSL2+ modem with four 100Mbps Ethernet ports and 802.11n Draft 2.0 module.

Multifeature, multi-application products on the rise, but standalone modems in ample supply

ADSL technology continues to prevail over Greater China's xDSL modem supply market. The region's ADSL modem suppliers produce ADSL2 and ADSL2+ variants, with models based on the latter ADSL version currently ruling supply. VDSL modems are also available from Greater China suppliers, but these units will not displace ADSL2/2+ modems in the next few years just yet.

Heightened product development in the region is resulting in a rising supply of modems with more value-added features and functions to support various applications. ‘Pure' modems still abound, but buyers will also find a growing slew of converged products integrating router, firewall, switch, even VoIP and VPN capabilities.

Saturation and consolidation in some areas, such as in Hong Kong where second-tier suppliers are hard-pressed to boost sales, fail to dampen makers' R&D enthusiasm. The emergence of competing technologies such as VDSL and FTTx is neither seen by suppliers as an immediate threat, and their market outlook for ADSL2/2+ modems for the next few years remain positive.

Indeed, the worldwide xDSL market continues on its upswing. The global subscriber base breached the 200 million mark in mid-2007, which is equivalent to a 29 percent year-on-year (YoY) increase, according to the DSL Forum. As of 2007, ADSL and its variants represented 90 percent of total DSL port shipments worldwide, followed by VDSL's 10 percent and SHDSL's less than 1 percent, according to broadbandtrends.com.

Taiwan accounted for nearly 90 percent of the global xDSL market last year. The island is poised to hold on to its market position, according to the Industrial Economics & Knowledge Center (IEK) of the Industrial Technology Research Institute (ITRI). IEK reported an annual growth rate of 1.5 percent in Taiwan's xDSL modem export value in 2007. Taiwan's xDSL modem shipment value is expected to hit $1.66 billion this year with an annual growth rate of 6.8 percent, up from $1.55 billion in 2007. In terms of volume, IEK estimates that exports this year will total 62.55 million units, a 12 percent increase from the 2007 shipments of 55.85 million units. Taiwan's xDSL modem shipments were led by ADSL2/2+ modems in 2007.

Many telcos favor ADSL2+ over previous DSL generations because it enables new profit-generating services such as IPTV, triple play and fixed-mobile convergence. ADSL2+ also supports online gaming, video- on-demand (VoD), streaming video, IP telephony and video conferencing.

These value points are complimented by the growing supply of ADSL2+ chipsets, which in turn, brings chipset prices down and encourages product design and development.

	Billion of Taiwan is offering the BiPAC 7402GX series, which supports ADSL2+, 3G, USB 2.0 and 802.11g wireless AP.

Supply of xDSL modems is increasingly being led by ADSL2+, an upgrade of ADSL technology that offers faster speed and wider spectrum. Its downlink speed supports 16Mbps to 24Mbps maximum, enabling it to support simultaneous transmissions of multiple video files and network games. ADSL2+ has a transmission range of 6km, which makes it suitable for new residential areas, as it covers more users without compromising access speed.

Output of ADSL2+ modems in Hong Kong has superseded that of ADSL2 units. Aztech Systems (H.K.) Ltd, one of Hong Kong's leading suppliers of ADSL2+ modems and other networking products, estimates that ADSL2+ modems accounted for about 98 percent of its modem shipments in 2007. VDSL modems made up the rest.

Aztech expects its ADSL2+ modem overseas shipments will grow by about 20 percent in 2008.

In Taiwan, makers expect more companies to produce more ADSL2+ modems for SOHOs and SMEs as the price gap between chipsets for ADSL2+ and ADSL2 thins.Although more suppliers expect VDSL's adoption to gain more speed this year due to triple play, ADSL2/2+ will continue to dominate the xDSL modem market. Moreover, bandwidth concerns could delay VDSL's adoption.

Some suppliers predict that VDSL and FTTx will co-exist with ADSL2/2+. Growing demand for faster speed could prompt more service providers to migrate to fiber to the home (FTTH), but adoption will be delayed by cost concerns and high maintenance requirements.

In terms of prices, mainland China makers forecast stable FOB quotes in 2008. Prices in Hong Kong dip by 5 to 7 percent annually. Prices of entry-level models will reach sub-$17 levels this year, with router and USB hosting functions adding $1 to $2 to the unit price. Models with a 4-port switch and router list from $22 to $25 per unit, and those that double as WLAN access points (APs) are $35 to $41 each.

Standalone modems are starting to give way to converged products with multiple features and supporting various applications. The mainland China market is yielding a rising supply of products combining ADSL2+ modems, routers, WLAN and VoIP. More makers are investing in ADSL2/2+ routers and integrated access devices (IADs) with modem function instead of standalone ADSL2/2+ modems. These devices, which can also feature VPN functions, are expected to continue gaining popularity among mainland makers.

New releases from Hong Kong likewise pack more new functions and value-added features. In terms of ADSL2+ performance, most models have almost identical specifications as suppliers use similar solutions from Broadcom, Conexant or Infineon. Size and design may also be identical, but some ADSL2+ modems also function as Ethernet and WLAN routers, USB hosts, HomePlug devices and DECT base stations.

The DSL1015EN ADSL2+ modem from Aztech integrates an 802.11n (Draft 2.0) gateway. It has a smart MIMO embedded-antenna for wide area coverage and is compatible with 802.11b/g. It comes with a USB 2.0 host port for sharing a printer or network storage device.

Aztech's DSL1215FUN-DH combo VDSL2 and ADSL2+ modem has an Ethernet WAN port for routing, four 100Mbps Ethernet ports for wired connection, and a Draft 2.0 802.11n module for wireless connection. Two FXS and one FXO ports are incorporated for receiving both PSTN and VoIP calls. The DSL1215FUN-DH also functions as a DECT phone base unit that can be paired with as many as four GAP-compliant handsets.

Hybrid networking products headline Aztech's product development roadmap. The company plans to integrate additional elements such as HomePlug and DECT.

High-end ADSL2+ modems from Taiwan integrate router, VPN, 802.11g, 3G and VoIP features. Although these high-end products are not taking up a larger share of the market as opposed to ‘pure' models, many suppliers look at multifunction broadband products such as IADs as the next step to extend their ADSL2+ modem product line.

Sercomm Corp. expects growth from its new IADs and triple-play products in 2008. Next-generation network technology, which includes GPON fiber, VDSL and DoS 3.0, will be Sercomm's product development thrust for xDSL.

Mainland China's Shenzhen Longway Electronic Co. Ltd has released a 4-port Ethernet ADSL2+ modem, the ED-802EV 2+, which supports routing function and is designed for multiple applications. Besides Internet access, it supports live talk, VoD, music hall, online cinema, point-to-point remote medical treatment, remote education and remote visual meeting.

Many makers, particularly in Taiwan, focus on designing ADSL2/2+ modems for the SOHO and SME segments. Some makers, however, do not plan to further expand their SME market or engage large-scale enterprises. This is because these markets are capable of upgrading their broadband equipment through VDSL or FTTx.

Mainstream ADSL2/2+ modems for the SOHO market are 4-port wired models. Taiwan's Jaht Technologies Corp. is currently focusing on ADSL2+ modems and has no immediate plans to produce VDSL products. The company offers the EAM-2104P2, an ADSL2/2+ modem router with four LAN ports. It supports downstream and upstream data rates of up to 24Mbps and 1Mbps, respectively. The model is priced at $30.

Golden Ocean International Techno-business Co. Ltd of Hong Kong offers the GO-ADSL8084 ADSL2+ modem with four Ethernet ports and the GO-ADSL8083 ADSL2+ modem with an Ethernet port and a USB 1.1 port.

The DSL514 ADSL2+ modem from Mito Digital Ltd is a 4-port Ethernet switch, router and firewall. It features NAT, SPI firewall, DoS attack protection and IP filtering.

Several mainland China suppliers are launching products that support more than four ports. These are designed to support IPTV, online games and customized video applications. QoS is also emphasized in new releases.

Shanghai DareGlobal Technologies Co. Ltd focuses on product function integration, performance enhancement and technology applications. Most of its ADSL modems are based on ADSL2+ technology. The company plans to launch products with more ports to cater to small LANs.

The company adopts ADSL2/2+ IC solutions from Conexant, Texas Instruments (TI) and Broadcom. The DSL products also support GlobeSpan's chipsets.

DareGlobal has released products for ISDN application. It also has launched EPON products for FTTH network. The products feature 10/100BaseT LAN ports and one PON interface supporting video, VoIP and high-speed Internet access.

Makers expect the 3G/ADSL2+ dual-WAN router to achieve a significant growth this year due to the popularity of 3G modems with a USB interface.

With many company subscribers applying for two Internet connections to ensure a reliable Internet service, some Taiwan broadband product suppliers are seeing the potential of this dual-WAN market.

Billion Electric Co. Ltd said that telcos and ISPs are increasingly looking to 3G services to increase their revenue streams. Billion will be offering networking products with a USB port for 3G backup.

The company has released a newly designed dual-WAN 3G/ADSL2+ router with a USB 2.0 port for 3G backup, the BiPAC 7402X series.

The company's BiPAC 7402GX is a 3G/ADSL2+ wireless VPN firewall router with integrated Wi-Fi protected setup (WPS) function and 802.11g support.

Billion is optimistic that the IPTV market will stimulate high transmission rate demand. In anticipation of this development, the company has released the BiPAC 7402(G)X, which supports IPTV applications.

Mainland China's Fujian Star-Net Communication Co. Ltd offers the DSL2110-EHR S4W+, an ADSL router and AP that allows users to build a WLAN or expand the wireless access through the current cable network. It provides high-speed Internet access through the ADSL router. The model is suitable for SOHOs, entertainment and recreation,transportation and travel.

The DSL2110-EHR S4W+ supports ADSL2+ and is backward-compatible with other devices. It also supports 802.11g, two USB hosts, four 10/10Mbps ports and VPN pass through.

Notwithstanding recent technology developments and with DSL technology maturing, more companies are avoiding adding more features or functions or expanding the applications of their products to prevent any major price increases.

Hong Kong's Topcom Asia Ltd follows the integration trend for ADSL2+ modems, but in moderation in order to keep prices from spiraling. The company refrains from integrating too many features into its ADSL2+ modems to be able to maintain competitive prices.

Most makers in mainland China are keeping their production capacity stable or planning moderate production expansions. Despite companies' robust product development activities, makers are anxious that profit margins will reach razor-thin levels with the price competition intensifying and production costs rising. Some companies have already left the line because of these challenges.

Fujian Star-Net has a monthly production capacity of 250,000 ADSL2/2+ modems. The company produced 1.8 million units in 2007, and forecast to increase output to 2 million units this year. It conducts SMT, insertion, soldering and testing of software and hardware in-house.

The company cooperates with China Telecom and China Netcom in developing ADSL2/ADSL2+ products.

DareGlobal has a monthly production capacity of 500,000 units. The company's DSL lineup includes ADSL2, ADSL2+ and VDSL modems. Broadband products represent 80 percent of DareGlobal's total sales revenue.

DareGlobal cooperates with local DSLAM equipment makers such as UTStarcom. It subcontracts mold making, plastic injection molding and SMT, and conducts soldering, software writing, final assembly, QC and packaging in-house.

Some companies in Hong Kong are watching market developments while pursuing less aggressive product development plans. Mito Digital, for example, has not released a new modem in the past 12 months due to the "difficult market," according to General Manager Anders Leung. The company is not developing new models, but will keep existing models as long as orders are still coming.

Golden Ocean has shifted its focus from modems to other products, said director Gary Wong. The company may eventually phase out its modems, but will continue to produce available models in the near term. It also supplies internal modems, Ethernet and Gigabit switches, and LAN cards.

Topcom has also seen its networking product line slow down the past months. Cordless telecom and wireless data communication products have been the company's core business for a long time. To offset its weakening market position and take advantage of the strong brand reputation it has built the past years, Topcom has expanded into other product lines such as healthcare and baby products.

As of 2007, about 96 percent of Taiwan broadband network makers have been producing their products outside Taiwan, according to IEK. Many of these makers have production facilities in mainland China.

Billion has a factory in Dongguan, Guangdong, where the company handles mass production. Billion has another factory in Taipei for new product development and small-volume production.

Billion has been producing ADSL modems since its communication division was set up in 1992. The company focuses on ADSL2+ modem routers, but also provides VoIP modem routers, SHDSL bridge routers and ISDN products.

Currently, the company has no plans for VDSL2 modems because of the limited market for VDSL products.

Jaht has several subcontractors in mainland China and Taiwan. The company outsources production of ADSL2+ modems to a Taiwan subcontractor, which can provide 20,000 units a year. The company churned out 10,000 ADSL2+ modems in 2007. It projects a stable output in 2008.

Jaht offers networking products such as xDSL switches and WLAN products, and industrial computing peripherals, which include fiber-optic media converters and powerline products. This year, Jaht plans to put more effort on its industrial computing peripherals as the company regards ADSL2+ modem technology and market as mature.

Sercomm maintains a factory in Chunan, Taiwan and an engineering and manufacturing center in Suzhou, Jiangsu in mainland China. Sercomm's Suzhou factory has a monthly capacity of 1.5 million ADSL gateways. The company plans to expand its capacity in 2009.

Sercomm shipped more than 3.5 million ADSL gateways and more than 1.1 million units of triple-play products in 2007.

The majority of modems produced in Greater China are exported. Hong Kong alone exported about 23.5 million different types of modems in 2007 with a total value of $243.6 million. Hong Kong suppliers of ADSL2+ modems are all export-oriented, although they also sell a small percentage domestically, usually under their own brand.

As own-brand sales fail to bring in the sales volume desired by most suppliers, most makers are after OEM and ODM orders from telecom operators. Unfortunately, it is mostly the tier-one suppliers that are able to catch these clients. Second-tier suppliers, therefore, have no choice but to cater to the retail channels.

Aztech estimates that 20 percent of its total output of ADSL2+ modems was sold under its brand, and 80 percent was shipped bearing buyers' brands. Topcom, which has built brand recognition in Europe, has strong distribution channels for its self-branded products and targets mainly major telecom operators and service providers on project basis for its ADSL2+ modems.

Aztech's roster of telecom clients include SingTel, Bezeq Israel Telecom, ETI-Salat (United Arab Emirates) and Telekom Indonesia.

Shenzhen Longway generated 50 percent of total sales from exports in 2007. Forty-five percent of its exports went to OEMs and 55 percent shipped to ODMs.

Forty percent of DareGlobal's sales revenue is generated from exports. In 2007, the company reported more than $40 million revenue from exports. About 70 percent of DareGlobal's output is shipped to OEM customers. The company's major export markets include India, Southeast Asia, South America and Russia.

Haoliyuan (Shenzhen) Electronic Co. Ltd, which produces ADSL modems, switches, LAN cards and wireless routers, accepts OEM and ODM projects. It ships its products to Europe, Asia, the Middle East, India and Americas.

Taiwan's Billion exports about 97 percent of its ADSL2+ modems under its own brand. The company's major export markets are Europe, Americas, the Middle East, Africa and the Asia-Pacific.

More than 90 percent of Jaht's ADSL2/2+ modems are shipped abroad, the bulk of which is absorbed by Europe. Eighty percent of the modems are sold under the company's own brand, and the rest is sold to OEM clients.

The continuous expansion in the DSL subscriber base in Eastern Europe, South America, the Middle East, mainland China and Southeast Asia is encouraging many makers from mainland China and Taiwan to concentrate on these regions.

Shipments of ADSL modems and ADSL/WLAN gateways to Asia and South America will exceed 41 million units this year, according to research firm iSuppli. Mainland China and Southeast Asia are the main regions driving DSL expansion. There are more than 43 million DSL subscribers in mainland China, compared with 27.5 million in the US and 15.7 million in Germany as of 2007, estimated the DSL Forum. Other regions experiencing explosive DSL expansion are Eastern Europe, South America and Africa.

In 2007, broadband network products from Taiwan were shipped to Europe (44 percent), US (29 percent), the Asia-Pacific (15 percent), Japan (4 percent) and other markets (5 percent). The rest was sold in the domestic market.The majority of makers in Taiwan are planning to explore developing markets for export business in 2008. For instance, Sercomm plans to strengthen its position in mainland China, India, South America and Eastern Europe. The company expects a 10 percent growth in sales of ADSL products from these markets.