In 2011, the market for embedded M2M modules performed worse than anticipated, according to analyst ABI Research, www.abireasearch.com. The research firm says the module industry as a whole earned only about $500 million during the first half of the year. ABI Research says this was due largely to an increase in the speed of ASP (average selling price) decline for the modules.
“Other principal causes for decline are the increased competition from Chinese module vendors and new programs from certain mobile operators to supply customers with very cost-optimized 3G modules, such as AT&T’s ‘3G Connect’ program,” says Sam Lucero, practice director, M2M connectivity, ABI Research.
The module market has been undergoing consolidation during the last couple of years, as a number of players have been acquired or merged with existing companies. Most recently, Swiss company u-blox, www.u-blox.com, acquired Fusion Wireless, www.fusionwirelesscorp.com. And in November 2010, Novatel Wireless, www.novatelwireless.com, acquired module-maker Enfora, www.enfora.com.
These two acquisitions are just two of the latest in a string of module-market consolidation moves that have been occurring for the past few years. Many module makers have opted to augment their hardware products with additional service offerings, and so provide a value-added service to customers.
However, the fact remains that modules are seen as a commodity by many in the marketplace.
“The widespread perception among module customers that modules are commoditized, interchangeable parts, and the threat of disintermediation by chipset vendors as devices using embedded modules reach large shipment volumes and application developers seek to reduce variable expenses, are two of the primary forces driving market consolidation,” says Lucero.
Consolidation through mergers and acquisitions will no doubt help some module vendors to weather the commoditization storm. The question is how far prices will continue to fall, and only time will provide the answer.