| Sam Wormley 2008-01-03, 10:33 pm |
| OEM Insights -- December 2007
In a short time, the current consumer markets have enlarged to the
point that almost 10 percent of U.S. households now own some personal
navigation device.
http://cp.gpsworld.com/gpscp/conten...p.jsp?id=478382
Dec 11, 2007
By:Stephen Colwell
GPS World
The GPS Road Ahead - 2008
As we wind down 2007, the market share numbers will begin to appear
somewhere in the first quarter of the New Year when companies report
their sales. What does the market look like in 2008 for mass market
and OEM products? Like Nostradamus, I always like to speculate as to
what may be in the future for manufacturers and consumers of GPS
devices. I wonder how many readers understand the short time that it
has taken for the current consumer markets to enlarge to the point
that almost 10 percent of U.S. households now own some personal
navigation device. Let's take a quick look at how the market has
evolved and then look at the drivers that will influence 2008.
Enter the Wayback Machine. The date is circa is 1990, a year that
fielded the first five-year study of the potential of GPS and only
one year after a fledging GPS World magazine was born. There were no
great banners proclaiming this technology was destined to become the
hottest Christmas present of 2007, or that it even had a bright
future. The constellation of GPS satellites was still incomplete,
coverage limited, and applications still forming in the minds of
developers and manufacturers. Selective Availability, the U.S.
government's approach to ensure primary accuracy was limited to
military users, degraded commercial accuracy to around 100 meters.
All advocates of commercial agreed this would severely limit the
technology in consumer markets. Workarounds were found with the
advent of dual-frequency receivers -- definitely not a mass-market
commodity -- where with post processing one could obtain centimeter
positioning, but not in real time.
In 2000 SA was turned off, the cat was out of the bag, and the march
towards the consumer market began.
Fast-forward to 2007, the hottest year ever for GPS-enabled
navigation devices. We see sizzling consumer purchasing, heavy
commitments in the construction and GIS markets, and wireless
carriers promoting location-based social networking. The advent of
smartphones (network independent) takes LBS to another level and is
attracting large enterprise and small-to-medium business (SMB)
interests. So what are we going to see in 2008 for mass-market
applications?
PND Segment
PND sales will continue to increase through 2008, as lower-priced
units continue to push consumer sales. Expect to see more offshore
imports as Taiwan and China get their factories in motion and target
the space. Tagging along after the expensive marketing efforts of
companies like TomTom, Garmin, and Magellan who have educated
consumers, the offshore companies will focus on secondary marketing
channels. They will gain some ground in attracting tier-one
distributors due to the high profit margins they will offer to gain
branding and market share.
The big three mentioned above will continue to add features such as
traffic content, pedestrian navigation, and cellular options such as
text and voice integration to their already popular lines. Garmin,
TomTom, and Magellan are also moving quickly to develop/expand unique
applications in niche markets that will focus on activities and
applications such as fleet management and enterprise applications.
Carrier-Based Navigation Services
Carriers will look in 2008 towards building and growing their user
base for navigation services. Social Networking (Web 2.0) holds the
promise of luring teens and young adults to develop networks where
they can connect with friends and use location to map people and
activities. Carriers will continue to work to develop
location-advertising programs as they see new revenue streams with
their large share of the connected phone space. Some carriers such as
Sprint are already focusing on enterprise businesses, providing
programs that use LBS for applications such as home healthcare
professionals and real estate professionals.
Expect to see prices drop on current carrier-based navigation
services, which typically run around $10 per month, to lower levels
as carriers begin to feel the pressure of smartphones, which are
unlocked and may contain their own navigation software that can be
employed at no additional cost to the user. Carrier efforts to bundle
only those application they select and charge the user for is quickly
coming under fire. Verizon recently announced they would allow users
to download third-party applications; this eventually will become the
new model for the carriers.
2008 will be a headache as carriers seek to find their way through a
maze of potential of LBS opportunities.
SmartPhones and LBS
Smartphones, a brigade for whom the RIM Blackberry is standard
bearer, hosting GPS and LBS applications are second only in growth
rates to standalone PNDs. This has the PND industry very concerned.
Smartphones do it all. A smartphone can connect to Wi-Fi, Wi-Max,
Bluetooth, and has a powerful operating platform that can serve up
e-mail, other services, and holds a tremendous amount of memory and
graphics. Combine that with a display that is equal to or larger than
current PNDs and you have a converged all-in-one device versus
spending money on separate platforms.
Although the big three PND manufacturers are comfortable taking on
their current competition, they have before never faced the threat in
their personal space from such powerhouses as Nokia, Hewlett Packard,
Google, RIM, Palm, or Microsoft. I see 2008 as smartphone
manufacturers driving a stake in the ground, with consumers and
business users making decisions between a PND and a smartphone.
Nokia's acquisition of Navteq has shown their hard interest in
developing the market for LBS services based on the smartphone
platform.
Integration of LBS with smartphones will be a major focus for the
manufacturers in 2008, as will the identification of LBS applications
to drive enterprise business development. Also in 2008, expect to see
fleet managers look closely at replacing hardwired GPS systems with
wireless GPS-enabled systems. The shift from vehicle-centric tracking
to driver-centric tracking could save the fleet manager considerable
investment, as smartphones can provide tracking, communications,
integration with vehicle diagnostics (via Bluetooth), and electronic
reporting through e-forms and data transfer.
Maps and Aids to Navigation
The only way that Nokia and TomTom are going to be able to pay off
their recent acquisitions of Navteq and TeleAtlas, respectively
(though the TomTom-TeleAtlas deal is still under European review)
will be to roll out some whole new mapping features that will drive
increased revenues and interests. In 2008, expect to see more 3-D and
terrestrial and satellite-based imagery. Google and Microsoft opted
out of the bidding war this season on the major map makers, so I
would predict we shall see some next-generation map visualization
products coming to market in 2008 from these companies. Google has
made tremendous investments in building its mapping databases, and
with the much talked-about Google phone somewhere out there, we will
see a platform and advanced mapping data perfectly integrated from
the ground up to provide the best of search engine capacity, mapping,
social networking, and location-based advertising content.
GPS Chips
I predict in 2008 we will see a real shootout on the GPS chip side,
both on price and between the players. The market forecast is strong
through 2012, but the real game is only a handful of companies buy in
really large quantities. The smartphone makers have added to the mix
now, which will add volume as the chipmakers struggle to
differentiate their wares to their buyers. 2007 saw a lot of
manufacturers changing chip suppliers. The majority stated the reason
as better performance, although I?m sure pricing was really the
endgame.
In 2007, we saw TI re-enter the GPS chip game, Broadcom bought Global
Locate and SiRF struggled under increasing pressure from competition.
I also saw a host of seasoned executives changing from one company to
the next in an everflowing opportunity to pick the right company to
work for. Expect to see additional entrants in 2008. This game is
just getting started, but I predict after a few more years we will
see a consolidation begin to take place in this segment.
Survey and Construction
Due to the housing slump in single-family dwellings I think the
markets for survey and construction will be soft in 2008. Commercial
development has still pushed forward and may carry the segment
through the housing debacle, but we must remember these GPS systems
have been on the market longer than most applications, and market
penetration rates hover around 40 percent, which is high to the
compared rates of PNDs or smartphones. They also carry a significant
price tag. Users may be opting to wait out new or additional
purchases. Mining and oil exploration is still going strong so I see
manufacturers potentially shifting their focus to these areas while
their more mainstay areas recover.
Precision Agriculture
The ag sector looks bright for 2008, with high oil prices driving
more farmers to corn and soybean, which are very suitable for their
GPS-guided navigation systems. Although I currently paying $4 for a
gallon of milk, I appreciate the benefits of ethanol and bio-diesel
production as a way to reduce our dependence on fossil fuels.
Industrial Niche Markets
In any new technology, manufacturers like to aim for the big fat
bull'seye. Get the most points with one dart. As the technology
matures or specific markets shrink, manufacturers start to look
beyond the low-hanging fruit. Industrial applications for GPS and LBS
have been somewhat ignored, but are now being targeted. Applications
where GPS is used in harsh environments or industrially sensitive
applications require a much higher level of integration and costly
case-hardened technology. A case in point is Garmin's aviation
product line. Early on, both Trimble and Magellan had aviation
product lines, but gave them up due to the extensive certification
required and the long time to market required to field these
products. Garmin founders on the other hand came from a background in
flight avionics systems and were able to factor the timelines and
understand the process. Garmin has a successful niche industrial
aviation business today based on that experience.
In 2008 I predict we see more effort from GPS manufacturers to spend
a certain amount of their R&D budgets to get back into the more
complex areas of GPS such as military products, automated guidance
systems, inventory control. and all those areas that lie outside the
bullseye.
The Soothsayer's Salute
The market for GPS products is well diversified and getting more so
by the month. 2008 will be another banner year. The crystal ball is
out of steam for now. My hat's off to the GPS industry professionals
for their efforts in driving the markets in 2007 and creating many
happy users. You rock.
Happy New Year!
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