The revue of global cellular M2M embedded module market decreased by more than $100 million in 2010, reversing the upward momentum of 2009, reports market research firm ABI Research.

The analyst firm, which blamed price erosion for the drop in revenue, has expressed concern at the continued decline in average selling price.

In 2010, nearly 34 million units were shipped but the industry revenue fell to $841 million from roughly $996 million in 2009, the research firm noted.

"Although total unit volume continued to grow in 2010, average selling pricings (ASPs) fell at a faster rate, leading to an overall decline in revenue," says Sam Lucero, practice director, M2M connectivity.

What is worrying is the sharp decline in ASPs is continuing in 2011 and is indicative of the fierce competition in the market, competition that has led to industry consolidation, such as Gemalto's acquisition of Cinterion and Novatel Wireless' acquisition of Enfora (News - Alert).

However, the research firm has predicted that increasing volume might spur market to $2.5 billion by 2016.

While module makers are challenged by both competition and an overall trend toward commoditization, the resulting declines in ASPs are broadening the addressable market for cellular M2M connectivity.

 As module prices decline, it becomes more feasible to embed cellular modules into a growing array of applications ranging from smart utility meters, to automobiles, to remote healthcare related devices.

"Ultimately, lower prices, combined with other factors that facilitate M2M application development, will lead to overall unit shipment volumes growing faster than prices are declining, and we will see overall module industry revenue grow significantly by 2016," says Lucero. "Consequently, falling ASPs are, in essence, benefiting module vendors as a whole, although individual vendors may not be able to survive the fiercely challenging market environment."