Mobile Bandwidth Demand Boosts SerComm's Opportunities in the Network Connectivity Market

A crucial decision made three years ago by James Wang, president of the SerComm Corp., boosted the company's chances of becoming the world's No.1 supplier of femtocells--small cellular base stations typically designed for use in a home or small business--and integrated access devices (IADs) this year.

Unlike his domestic counterparts, Wang chose to bet on femtocell technology instead of delving into the development of worldwide interoperability for microwave access, otherwise known as WiMAX. WiMAX was then touted as the mainstream next-generation mobile broadband connectivity technology, but it was sidelined after its co-initiator, Intel, shut its WiMAX Program Office down in 2010 in response to strong global support for long time evolution (LTE) technology.

As a network-connectivity technology, femtocell might not be as sophisticated as WiMAX technology and is mostly supported by second-generation wireless networks using GSM (global system for mobile communications), CDMA (code division multiple access), and UMTS (universal mobile telecom system) technologies; femtocell technology is highly practical, however, as a single station can route signals from up to five mobile phones through a broadband connection and pass them to the service provider, thereby bypassing the conventional phone-to-tower path.

SerComm's importance in network-connectivity equipment manufacturing led to its inclusion in the MSCI World Index in May this year, making it the first Taiwanese network-connectivity manufacturer to be listed on the index in three years. The listing also reflects the company's potential for growth—a potential that is rapidly becoming reality, as the firm's revenues for May hit NT$1.09 billion (US$37.5 million at NT$29:US$1), soaring 86.58% from the previous month. Revenues for the first five months this year totaled NT$4.8 billion (US$168 million), up 60.63% from the same period of 2010.

Wang is confident in his company's future, believing that the brisk markets for smartphones and tablet PCs, as well as the rising LTE market, will bring more lucrative opportunities to the network-connectivity industry.

“[Apple CEO] Steve Jobs is a genius for the creation of the iPhone and iPad,” Wang comments. “Those two devices allow consumers to wirelessly download application software through various terminals and networking equipment at home.” He stresses that the two mobile computing devices have revolutionized the way people communicate, making them more dependent on data telecommunication than on voice telecommunication.

This change, Wang goes on, has greatly benefited the network-connectivity industry. “Imagine that there are five people downloading movie files on iPhones at the same place,” he explains. “Such simultaneous downloading would strain the bandwidth of nearby cell towers. Service providers are inclined to install femtocells and Wi-Fi hot spots to add bandwidth instead of building more cell towers because of the cost and the potential for microwave interference among the towers.”

The rising LTE market, Wang estimates, will bring at least a decade of prosperity to the network-connectivity industry. “When the LTE market starts taking off,” he says, “the demand for bandwidth will grow at an explosive speed, bringing huge business opportunities to network-connectivity manufacturers.”

A restructured telecom market, Wang says, gives network-connectivity manufacturers convenient access for deals with telecom-service providers. “The Huawei Technologies Co. and ZTE Corp. are the major players causing the restructuring in emerging markets and the European market, with their less expensive equipment,” he explains. “In the past, service providers would buy equipment, including consumer-premise equipment (CPE), from central-office equipment (COE) suppliers. But since Huawei and ZTE entered the market with less expensive equipment, service providers have begun to place CPE orders directly with dedicated suppliers.”

This year, mobile-service providers will replace wirelined-service providers as SerComm's major contract sources, Wang concludes: “Now when you look at the telecoms market, you'll see that bandwidth-expansion investments in mobile services are much more vigorous than in fixed-line services.”