The global market forsatellite navigation hardware continued its scorching pace in 2007, resultingin big profits for the major hardware manufacturers, and analysts predict saleswill grow more than $20 billion by early next decade.
ABI Research, a marketresearch firm in Oyster Bay, N.Y., estimates last year's market for satellite navigation hardware was $33 billion, a $6 billion increase from2006. The company attributed the growth to falling prices for all types ofhardware and dramatic volume increases in the sales of Portable NavigationDevices (PND) and satellite navigation-equipped mobile phones in Europe and North America.
The company forecasts thesatellite navigation market growing to $54 billion worldwide by 2011.
The two largestmanufacturers of PNDs, Kansas-based Garmin International and Netherlands-basedTomTom NV, each shipped a record number of units during the third quarter 2007 — 2.7 million and 2.2 million, respectively. The two companies manufacturednearly half of the PNDs sold last year.
Garmin anticipates 2007revenue of more than $2.9 billion and reported a profit of $547.7 millionthrough the first three quarters, up 39 percent from the same period in 2006.TomTom anticipates 2007 revenue of 1.7 billion euros to 1.8 billion euros ($2.6billion to $2.7 billion as of Oct. 24) and reported a profit of 211 millioneuros through the first three quarters, up 32.7 percent from the same period in2006.
Magellan GPS of SantaClara, Calif., the world's third largest maker of satellite navigation devices,does not release financial data, but marketing director Robert Snow said saleslast year far exceeded the company's expectations.
"Our consumersatellite navigation products saw the biggest growth in North America, butMagellan also made substantial inroads in Europe," Snow said.
Dominique Bonte, atelematics and navigation analyst at ABI Research, said 2007 saw consumersmoving away from factory-installed satellite navigation systems in cars andtoward PNDs and satellite navigation-equipped mobile phones. ABI Researchestimates the global market for PNDs jumped from 12 million units in 2006 to 24million units last year, and Bonte said that figure could be as high as 27million units following a late-year surge. Sales of mobile phones equipped withsatellite navigation more than doubled in 2007 to 5.1 million units.
Bonte said the surgingpopularity of consumer navigation gear can be attributed in large part tofalling prices. PND prices fell from $450 to $300 on average over the lastyear, while mobile phones with satellite navigation capability dropped from$100 to $85. Factory-installed car navigation systems dropped on average from$2,000 to $1,800, and integrated after-market car navigation systems droppedfrom $1,200 to $1,100.
"We are seeing aprice decline of 30 percent a year globally," Bonte said. "Thissimply cannot continue. I expect this to slow down because it's unsustainable.Much of this is manufacturers dumping their low-end models."
High-end PNDs withfeatures like digital music players, speech recognition capability and trafficreceivers remain in the $400 to $500 range, and these hold their value better, hesaid.
By 2011, ABI Researchprojects global sales of more than 100 million PNDs, 62 million satellitenavigation-equipped phones, 14 million manufacturer-installed car systems and 4million after-market car systems.
A major question mark,according to Bonte, is whether satellite navigation-equipped phones eventuallywill erode the market for PNDs, much as smart phones did for personal digitalassistants. Such an outcome is far from inevitable, he said, noting that themarket for portable music players remains strong despite the widespreadincorporation of this technology into mobile phones.
"ABI Research isconvinced PNDs will continue to be the most popular device, because they areoptimized for in-car navigation with big screens, speech recognition, touchscreens and built-in FM transmitters," Bonte said. "I expect peoplewill have more than one navigation device. They will have one in their cars,and at the same time, they will have handsets for pedestrian mode."
Jason Kim, a senioranalyst at the U.S. Commerce Department's Office of Space Commercialization,thinks the globalsatellite navigation hardware market is far from saturated and willcontinue its strong growth.
"I think priceshaven't dropped that much," Kim said. "Capabilities have increased ateach price point, but the most desirable units are still at the $300 or $400level and have been for a long time. Capabilities will continue to increase,but it won't be until we're near the $50 level before people will really becrazy about it."
Today, the U.S. GPSconstellation is the only fully functional global satellite navigation system.As emerging systems such as Russia'sGlonass, Europe's Galileo and China's Compass become fully operational,even more people will become satellite navigation users, he said.
"As more and moresystems come on line, it's just going to become more appealing," Kim said."I think the end user doesn't care where it comes from or who owns it, butthere is already a lot of marketing being done to increase adoption of[countries'] own national systems. And economies of scale will allow chips tobe built for even less than they are now."
The possibilities forsatellite navigation, much like the Internet, are limited only by the humanimagination, Kim said. For example, he said, future business models could evenincorporate an advertising component.
"Thesweet spot is not yet a reality: your mobile phone tells you you're near aMcDonald's and sends you a coupon for it. That has been talked about as what'snext for 10 years, but nobody's done it yet."
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