Navigating the navigation market
Fifteen years ago people hardly had mobile phones; today it seems awkward if you do not possess one. After this success story the IT sector has its new gadget: Navigation systems. Similar to the mobile phone market it is growing tremendously.
In Korea, where almost one-hundred companies are fighting for a market of only 1.5 million navigation devices this year, some companies have found niche markets by providing navigation systems with better or more features: Display size has moved from 3 inches to 7 inches, MP3, MPEG4 and even digital TV was implemented.
In the future we will see implementations of more technologies in order to keep low-price competitors in a distance: WiBro/WiMax so that drivers can stay always connected, voice recognition to avoid pressing buttons while driving, and features for safe driving.
We can conclude that in the long run – besides a few big hardware manufacturers – there will be only room for small manufacturers that produce hardware for niche markets which are too small for big players to consider.
The trend to additional features will turn-out to be a threat to incumbent companies: Once navigation is just one of several functions, manufacturers of other products will immigrate to the navigation market. Most notable are manufacturers from the following three areas: 1. Mobile Phone, 2. Notebook, 3. Automotive.
Once these companies have built the market successfully and consumers got used to that feature, the mobile phone manufacturers will easily dominate that market. Due to their patents and high volume production, it will not be possible to beat them on price. They probably will have to pay less than USD 1,- – for the GPS chip. In addition their experience will enable them to design products with better performance.
During the 3GSM World Congress 2007 in Barcelona Nokia has already announced that in the future most mobile phones will have GPS capability. So we can expect that mobile phones will enter the navigation market even more aggressively.
This trend is supported by mobile network operators, which seek for new opportunities to gain revenues. While fees for phone calls are continuously decreasing, operators are looking for ways to increase the usage of data transfer with applications like exact positioning or downloading of maps.
In Korea the share of mobile navigation has reached already 30 % of the total market for navigation devices. Using the mobile phone for navigation enables the driver to tell an operator where he wants to go so he does not have to press buttons while driving. The only advantage of the normal car navigation system remains the display size.
Navigation is one important feature to distinguish the usage of UMPCs from normal notebooks. While currently only a few devices have an embedded GPS receiver, we will soon see more of such products. These devices will set the limits for high-end navigation systems offering already features like HSDPA, WLAN, WiMax and 900 MHz CPUs.
Once there is a GSM module in the car and since more and more car break-downs are due to the car’s electronic system, automotive suppliers are planning remote diagnostic solutions: Accessing the car computer, reading the trouble codes, and sending the data to designated repair shops for remote inspection. Via a display in the car the driver could be warned if the car is not functioning correctly.
When there is a built-in GPS receiver, GSM module, and display in the car, it is only the map software missing to have a full-functional navigation system. Because no extra hardware cost is involved, such a solution could easily become standard in cars. In Japan most navigation devices are already built-in systems.
Due to the remote diagnostic capability the navigation devices would even offer a feature which companies from the IT industry cannot provide, securing companies like Delphi, Visteon, Bosch, and SiemensVDO with a comfortable market entry barrier.
Because there will be still demand for mobile devices, car manufacturers will provide an interface in the dashboard where drivers can plugin mobile devices. Through this interface the navigation system can be connected to the car system, if the software is compatible. Due to the software compliance car manufacturers will be able to control companies that provide these devices.
While new market entrants will threat current hardware manufacturers, they will boost the business of navigation software companies. Companies that provide map data and point of interests (POIs) as well as companies that provide the maps and user interfaces will see a growing number of potential customers with huge volume.
Nevertheless, also the software companies have to adjust to new challenges: 1. the map data will have to contain more attributes, 2. new applications have to be embedded, 3. navigation systems will become interactive.
But also in developed countries like Korea opportunities can be found: The medium-sized company Thinkware has built the best data and map software for that country and consequently holds 50 % of the local map software market. No competitor can offer the magnitude of information as Thinkware. It takes 4GB to store Thinkware’s map of South Korea, a country which has only 1 % of the size of the US or China.
The big race for map data for India and China has just started and it is not clear yet which companies will emerge as market leaders.
Maps for example will be linked to Google Earth and/or to real pictures of the streets and the views around.
Since all data for one country would be too huge, the data had to be downloaded selectively, offering good business models for mobile operators.
Especially when driving, I am entering continuously areas I am not familiar with. Local based services (LBS) can help with information in these areas. While companies in most countries are still struggling with profitable business models, companies in Korea have discovered successful ways and are preparing to go overseas. Again a trend which is heavily supported by mobile phone operators.
While there are certain trends in the main stream navigation market, there are always new applications and requirements arising which offer business opportunities. Recently we have seen three new areas: 1. Enhanced View, 2. Insurance, and 3. Traffic Authorities
Besides a few big players mediumsized hardware companies will only survive in niche markets. In a first wave mobile phone companies will control the low-end market, while notebook companies will control the high-end market. In a second wave automotive companies will gain more and more market share.
Current software companies may retain their current business but there is enough room in the market for new software companies that can offer detailed map attributes and/or attractive new applications.
The market will move away from pure navigation to also-navigation, offering life-style features like restaurant recommendations and safety features like cameras or eCall.
Big companies will only survive when they stay price competitive, while small and medium-sized companies can only survive when they anticipate market trends on time and are amongst the first to supply new demand.
SDT is committed in being a leader in its field.