GPS device price pressure continues to drive consolidation in the GPS semiconductor industry
Q4 2008 PND sales revenues from TomTom and Garmin declined 26% and 17% year-on-year resepectively.
In 2008, PND sales growth was hit by the macro economic environment, especially in Europe where shipments grew to about 17 million units, up only 0.5 million units compared to 2007. In North America, the holiday season proved yet again to be the most important time of the year for PND sales. Shipments increased to roughly 8 million units in Q4 and nearly 18 million for the full year. Garmin and TomTom maintained their market leadership, together sharing about 70 percent of the European and North American markets. Although the price pressure in the PND segment eased somewhat compared to 2007, lower unit growth has not fully compensated average selling price declines. TomTom’s PND revenues declined 26 percent year-on-year in Q4 2008 to € 444 million and Garmin posted US$ 825 million in revenues for its automotive/mobile segment, which is dominated by PNDs, down 17 percent year-on-year. Especially Garmin has been successful at maintaining margins through operating efficiency improvements and material cost reductions.

PND vendors are not only looking to reduce bill-of-material costs through lower cost components, but also cost reductions through new system architectures. Vendors have introduced PNDs based on system-on-chip solutions that combine GPS basebands with an application processor. Examples of semiconductor vendors able to deliver GPS SoCs include SiRF and STMicroelectronics. The first SoC-based PNDs were introduced in 2007 and reached a penetration of roughly 25 percent in 2008. Further cost reductions can be achieved with software GPS receivers that combine GPS RF ICs with a software baseband, performing all calculations on the existing host processor. The first PNDs using software GPS basebands are expected to become available in time for Christmas 2009.

For the rapidly growing GPS handset market, semiconductor vendors have to meet somewhat different demands. For navigation centric PNDs, the GPS functionality is at the heart of the solution, whereas GPS is only one part of the total multi-radio connectivity platform in a mobile phone. Handset vendors are increasingly looking at connectivity combo solutions that combine GPS with other connectivity technologies, primarily Bluetooth. Going forward, GPS vendors must be able to deliver very cost effective chipsets that combine GPS with Bluetooth and FM radio in order to be competitive in the emerging mass-market GPS handset market.

The increasing competition and new customer demands have led to significant changes in the GPS and wireless chipset value chain in the last 24 months. Today, very few pure-play GPS specialists targeting portable consumer electronics remain. In mid 2007, Broadcom acquired GPS chipset developer Global Locate to expand the company’s wireless chipset portfolio. In late 2007, Atheros Communications acquired u-Nav and NXP Semiconductors acquired GloNav. GloNav’s GPS products are now part of the product portfolio of ST-Ericsson, the new wireless semiconductor joint-venture between STMicroelectronics and Ericsson, which was formerly announced at the Mobile World Congress in Barcelona in February 2009. The Bluetooth connectivity specialist CSR entered the GPS business by acquiring NordNav Technologies in early 2007 and significantly strengthened its portfolio when it merged with SiRF in February 2009. Meanwhile, the GPS specialist NemeriX proved less fortunate and closed down operations in early 2009.

André Malm
Senior Analyst
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