While the number of products incorporating Bluetooth technology was slim this past holiday season, the number of companies interested in producing Bluetooth chipsets is bountiful. Of the 82 exhibitors at the recent Bluetooth Developers Conference in San Jose, Calif., a majority were showing off Bluetooth chipsets that they said were ready for quantity production.
Unfortunately for the smaller chip producers in need of investments to see their Bluetooth chipsets become a reality, a report from the DVG Research unit of Daedalus Venture Group L.L.C. found that needed venture-capital investments in Bluetooth technology are still but a dream.
The report found that during the past 12 months, venture-capital investments in Bluetooth-related ventures constituted less than 1 percent of total placements made by VC funds in the U.S.
“These numbers indicate that VCs are still asking tough questions about Bluetooth. Specifically, where are the compelling applications that will drive long-term demand for this technology?” said Adam Needles, director of DVG Research. “They’re also looking at competing standards, such as the 802.11b wireless networking protocol, and thinking pretty seriously about where it is in this ecosystem that Bluetooth fits best.”
DVG found that Bluetooth ventures classified as semiconductor companies represented slightly more than 74 percent of total Bluetooth-oriented VC investment in the past year, while application-oriented Bluetooth ventures have barely garnered more than 23 percent of VC investments.
“Analysis of this data, in light of current macro trends in the marketplace, points to what we believe has become an artificial demand for Bluetooth chips across the communication technology space,” Needles said.
Needles added that irresponsible supply-side projections showing large growth in the number of Bluetooth-enabled devices are driving manufacturers demand for chips, despite the lack of widespread demand for Bluetooth at an application level. This situation has raised the question as to whether the demand for Bluetooth chips was artificial.
The report pointed out that many VCs investing in the Bluetooth market space are focused on semiconductor companies because of their perceived higher-margin business models. DVG said this type of investing would prove to be a short-term phenomenon as the marketplace quickly becomes overly saturated with chip manufacturers while still lacking in real applications for the technology.
Within the next few years, DVG predicted prices for Bluetooth chips will quickly fall, reducing VC investors’ margins, which could be further exaggerated without serious growth in those applications that ultimately will drive longer-term demand for Bluetooth chips.
