March 30, 2001, 6:39 AM — Bluetooth garnered much attention at last week's CeBIT trade show, with laptops, cell phones and all manner of other gadgets on display that made use of the short-range wireless technology. But one factor that could kill the Bluetooth buzz has gone largely overlooked, according to analysts and industry insiders: if prices for Bluetooth chips don't come down, most people won't get their hands on the technology for a good while yet.
For Bluetooth to become widely used, companies that make chips for the technology must reduce the cost of their products to a level that's reasonable for makers of mass market electronics products. At the same time, until those gadget makers start to order Bluetooth chips in high volume, prices will remain high. The catch-22 situation could keep Bluetooth on the back burner until 2003 or even 2004, according to some analysts.
"At its current cost, Bluetooth is not going to work its way into the mass markets," said Ben Thompson, senior analyst at Gartner Group Inc., reflecting the view of several analysts and industry executives interviewed for this story.
The ideal price point for the set of components needed to bring Bluetooth capabilities to a product -- typically a processor, radio transmitter, antenna and flash memory -- is around $5, Thompson and other analysts said. Most Bluetooth chip sets on the market today start at $10 to $15 -- a substantial difference for device makers that produce low-margin goods in high volumes.
For users, the stakes are high. The wireless technology promises to free them from the tangled web of cables used to connect devices at home and at work. A PC with Bluetooth, for example, could send print jobs to a printer across the room over the airwaves. Perhaps more exciting, Bluetooth could be used to connect cell phones to laptops and handheld computers, turning phones into convenient wireless modems. In a more futuristic scenario, a Bluetooth shoe might connect to a jogger's watch, providing information about the runner's speed and distance traveled.
Those benefits won't become widespread any time soon if the price for specialized chips used in Bluetooth gadgets doesn't come down. Some analysts said this fact has been overlooked by companies seeking to promote Bluetooth as the next big thing.
"Bluetooth is one of the most over-hyped technologies of the century," said Phillip Redman, research analyst at Gartner, who agreed that prices must be slashed for Bluetooth to be successful.