The Next GPS Mass Market

As Americans we, and to some degree other countries, have a love-hate relationship with China. The tragedy of the earthquakes in Sichuan province and the horrible aftershocks has caused an outpouring of sympathy from the world. This editor would like to personally express gratitude to the world aid organizations, relief workers, and the technologists who are participating with the Chinese relief aid. Most of all I would like to express my condolences to all the families that have lost loved ones there.

The history of China's interest in GPS/LBS has developed at a tremendous pace since 1988, when Chinese Government officials invited Charles Trimble, founder of Trimble Navigation, to China to display his GPS technology. Those early meetings, along with the help of other international and U.S. agencies, such as the U.S. Geological Survey (USGS), formed the foundation of China's ability to monitor earthquake activities. The following illustration provided by the Massachusetts Institute of Technology and USGS shows the epicenters of the recent quake, along with the paths of movement as recorded with GPS.

China: The Largest Predicted Mass Market for GPS/LBS Products

The number of units being sold in China today as well as those that will be sold over the next five years varies greatly depending on which research report you buy or read. Currently there are more than 1,000 Chinese GPS operators and handset manufacturers in the business of building devices, developing software, and providing mobile networks.

According to Market Avenue, the cost of starting a business is fairly low, and this is breeding struggle. "As entities with different backgrounds swarm into the market, overlapping investment and resources cause inevitable waste. In addition, the entry threshold for GPS operations is rather low. With one operation platform, capital input of $40,000 to $66,000 and several workers, enterprises can engage in GPS operations."

Even though China is in its infant stage of handheld GPS/LBS, the market has the potential to grow rapidly. Research and Markets, an Irish firm that recently released a report on the Chinese GPS/LBS market says that "In 2005, the number of individual LBS users (excluding car LBS users) in China hit 0.966 million. LBS users were less than one percent of the total number of mobile phone users. Yet, there are great potential number of users for handset LBS, therefore the market for handset LBS is considerable. According to the forecast, the number of individual LBS users will have risen to three million in 2007 and the market size will be valued at RMB 750 million. This shows that Chinese LBS market is still in the primary stage of development, but the market will maintain a fast-growing momentum and enjoy bright prospects. By 2008, the number of GPS handsets with navigation functions will reach 20 million. In this sense, the handset LBS market will witness broad development."

U.S., European and Taiwanese Manufacturers Head to China

The next big market for personal navigation devices (PNDs) or the software that runs on them is not being ignored by the big players. Companies like TomTom, Microsoft, Garmin, Navteq, Magellan, Mio, and OnStar have all either opened offices in China, or are have entered joint ventures with Chinese companies. The obvious fear is that these non-Chinese manufacturers have a short window of opportunity to build brand recognition, create market share, and get customers using their operating systems or mapping data. Once the Chinese Dragon gets out of the box, the fight will be on for hundreds of millions of unit sales. It's a calculated risk, as the Chinese Compass system could turn commercial and China could subsequently require all navigation systems to use this service instead of GPS.

Olympics Building GPS/LBS Recognition

The Olympics will have an impact in building market share recognition in China. As recently reported in GPS World, food for more than 10,500 athletes will be monitored, tracked, and delivered with the aid of GPS. "The whole process will be monitored from the start of production through transportation to the end users," said Wang Wei, an executive vice president of the Beijing Olympic Committee. "We are very confident about ensuring food safety in Beijing."

Wang also mentioned that measures would also be taken to ensure food safety for the general public. Beyond the GPS devices the Olympic Committee will be using, each athlete will probably arrive with their own GPS management training device. A high percentage of visitors will surly arrive with a PND to navigate the streets of Beijing. The 2000 Olympics in Athens drew more than 100,000 visitors. This event could well boast the most concentrated use of GPS of all time in a single location.

China: Friend or Foe?

We go back and forth as mentioned earlier on how we feel about China. We fear its low cost imports, yet move our factories there. We enjoy importing to the Chinese but not as much as they enjoy importing to us at a three to one rate. We are wary of China's human rights policy and political intervention in the rights and freedoms of its citizens. In November of last year a report came out from a think tank in Washington D.C. warning about Chinese ability to jam GPS. According to Charles R. Smith of Newsmax: "China has deployed special vans equipped with sophisticated electronics designed to jam U.S. GPS satellite navigation signals. The fear inside the Pentagon is that China will deploy large numbers of these vans to jam GPS signals over large sections of its territory. Intelligence officials are watching the vans carefully to assess their capabilities and to see whether China moves to export the technology to other nations like Iran. The U.S. intelligence agencies have photos of the vans, taken from space and on the ground, but are not sure how capable they are in jamming GPS-guided weapons in the American arsenal."

This is the crux of the mass market dilemma. It's like being a kid all over again. You see your friend playing with a new toy and you want it. You get one just like it and then he get's a better one. Then you get a better one, then he does, and escalation continues. Along the way, you realize he is not even your friend anymore.

Let's try working together to continue to open the mass market for GPS/LBS technology. It is the way we started. Remember?

Welcome, China.