Gadgets using Bluetooth short-range wireless networks are all the rage, especially at the CeBit IT show. But they won't become mass-market devices unless the prices for Bluetooth chips come down.

For Bluetooth to become widely used, companies that make chipsets for the technology must reduce their cost to about $5. Most Bluetooth chipsets on the market today start at double that and, until gadget makers start to order Bluetooth chips in high volume, prices will remain high.

That catch-22 could keep Bluetooth on the backburner until 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 industry-watchers Gartner Group.

Manufacturers say they each expect to ship, on average, only about 250,000 Bluetooth chips to customers this year.

Since Bluetooth requires radio transmission and a processor, current wisdom dictates two separate chips. But single-chip Bluetooth devices are expected to appear soon from the likes of Samsung, Motorola and Britain's Cambridge Silicon Radio (CSR), and this will drive the price down.

CSR's single chip is already used in some of Sony's Vaio notebooks, but it will be 2003 before CSR will have enough orders to pump out the chips at $5 a pop according to Matthew Phillips, CSR vice president.