So, what’s with Garmin acquiring Navigon per their announcement yesterday? What’s going to happen to the PND (Personal Navigation Devices) market and vendors such as Garmin, TomTom and such? I wanted to share my thoughts on this topic. But first , a little history…
The PNDs are based on the GPS (Global Position Satellite) systems that essentially consists of 24 satellites orbiting the earth. These satellites constantly transmit their location and time (in addition to other data). GPS receivers such as those in PNDs or cell phones essentially receive these signals and then calculate their relative positions on earth. Receivers need signals from 3 or more satellites to accurately determine their locations (altitude, speed etc). The process of computing receiver location (absolute or relative) is called trilateration (defined as the process of determining absolute or relative location by measurement of distances using the intersection of the geometry of circles or spheres – a little technical right? There’s a lot of material on the web for you to peruse on this topic if you are interested).
Well , the history part of this technology stems from the decision taken years ago by the U.S Military (1973) to enable accurate tracking of their assets (NAVSTAR system). In the 80s, they decided to allow civilian access to the technology, thereby sowing the seeds for the mass consumer PND market (Garmin was incorporated in 1989). While the market has quietly matured, it was only in the late 90’s and the 2000’s, with the advent of many consumer grade GPS receiver devices, that the GPS technology came to the consumer’s doorstep.
But why am I interested in this? It is because the ubiquitous GPS receiver (it is actually a chipset) is now in the mobile phone and the location based “everything” (LBS) has come to the fore. With most of mankind in procession of the cell phone it is only a matter of time before signals from those satellites are going to be computed in your cell phone to determine your location (or everyone’s location for that matter). It’s already happening BTW – think FourSquare! Hence, the relevance of my opening questions – Is the PND market going to fade into oblivion?
I think not. My take is that the PND market will shrink and not fade away. ABI research predicts a market decline of 50% by 2014. The key driver contributing to the market decline is of course the presence of the GPS receiver in the cell phone. Think about it – the cell phone is fast becoming the centre of our universe – would’nt you agree?. You can make calls, text messages, snap photos (The art of Mobitography), play games, interact with your surroundings (Augmented Reality), etc etc and also BTW, can utilize the device to help you find directions – very much like your friendly PND ($299 only!). With smartphones becoming more popular in features and price, nobody wants anything less.
The secondary driver contributing to the PND market decline is the dynamics of the PND market itself. The market has characterized itself with price wars, margin erosion, over-featuring of the products etc. In other words, the PND vendors have boxed themselves into a corner. As a consequence, in order to survive, my take is that these devices will go niche and find homes in vertical markets. For example, fitness market, in-car telematics, avionics, marine navigation, transportation and logistics, supply chain management, defense and security etc. Garmin already has multiple lines of business that service many of the verticals I mention.
It must be noted that the automotive sector is a big driver of PND vendor revenues. Case in point, more than 60% of Garmin’s revenues comes from this sector. Furthermore, the likes of Garmin and TomTom already have competition in the in-car telematics segment inthe form of GM’s OnStar. OnStar is now on more than 6M Chrysler cars. GM recently decided to open up OnStar navigation to everyone on four wheels. They are now selling a rear view mirror attachment for $299 plus annual service that allows for all the benefits of OnStar. Ford has something similar – Ford SYNC, MyFord Touch. Obviously the PND guys are feeling the heat. Why else would Garmin venture past the beaten path to create the Nuvifone?
Folks who would continue to benefit from the GPS windfall are those who provide GPS based silicon (receivers). Companies such as Broadcom, Qualcomm, Atmel, Maxim etc will continue to reap the rewards of the market growth both in niche and consumer GPS based markets. GPS receivers of various sorts (in GPS modems for example) have been used for years to track mobile assets such as trucks, shipments etc. PND manufacturers helped expand this market, creating steady growth. And GPS enabled cell phones helped to create a textbook hockey stick growth scenario for the GPS receiver OEMs (due to the solid QoQ of the mobile phone market).
This is indeed a fascinating topic. If not already, we have front row tickets to an very interesting event. The decline of the PND market is going to be witnessed by all of us (or will I be wrong?). And to a good extent, we are also participants in this event. It will certainly be interesting to see how the PND market responds to this challenge.
In the next part, I will share some more thoughts on this topic. In the meantime, do you have an opinion on this topic? Come on, don’t be shy…