Business Outlook - PND Growth May Slow

August 1, 2007 GPS World

Analysts and industry executives say the dominant LBS market segment is still navigation. Portable navigation devices (PNDs) are selling well, but more than one analyst has said that the robust sales growth on this line may slacken as mobile handsets begin to offer better functionality.

“I absolutely think that PND markets will slow as cell-phone functions improve,” said Thilo Koslowski, Gartner Research vice president. “Limiting the growth are cell screen size and functionality. The handset ease of use also has to improve.”

The dominant players in the PND market are getting their units into the biggest retailers, perhaps making it harder for other companies to gain entry, Koslowski added. “The Garmins, TomToms, and Magellans are pushing their brands to the Wal-Marts, Best Buys, and others to build brand awareness and drive sales,” he said. “Companies such as Mio are making inroads because of their unique products and pricing. Right now, the hottest market for PNDs still is the United States — particularly because embedded systems didn’t sell well. In Europe, where the market is more mature, price is everything to the consumer.”Research firm In-Stat recently projected that the market for PNDs will reach 56 million units worldwide by 2011, up from 14 million in 2006.

Another analyst says that while the phone eventually will overtake the PND as the mass-market product of choice, new technology may make the popular car devices tough to pass up. “PNDs will start to have increased connectivity to give them much more capability than they have now,” said Lisa Peterson, president of Peterson Mobility Solutions. “With the handset, you are able to locate family members, have a tie to marketing and e-commerce. You can’t do that with a PND right now.”

A July 2006 survey by C.J. Driscoll & Associates found that interest at that time in purchasing a PND ran 50 percent higher than interest in subscribing to a cell-phone nav service (see Figure 1).

iPhone Challenge. Clem Driscoll, president of the firm, believes that Apple’s iPhone and other handsets won’t be able to knock off PNDs as the consumer’s choice because their main use is voice — something consumers are finicky about.

“While the iPhone will help grow consumer adoption and awareness of navigation, it doesn’t have GPS,” he says. “Some people are just more comfortable with voice-only on their cell phones. Just like many people are comfortable with a stand-alone portable navigation system, rather than using a cell phone for those services.”

Driscoll says it is simplistic to think one product will soon dominate the other. “There definitely is room for both (PNDs and nav-capable cell phones).”

iPhone’s screen, clearer and better than that of many PNDs, suits it well for LBS. However, absence of organic GPS makes it suspect, says Elliott Drucker, president of Drucker Associates.

“The lack of an internal GPS is a glaring omission for iPhone. It is kind of surprising as many mobile phones have it,” Drucker adds. “The iPhone is by far the most expensive phone out there. It touted a plethora of features, but it doesn’t have GPS.”

Drucker states that the iPhone, which operates on the EDGE data network, is not fast enough to zoom in and out on every gas station or use other LBS applications. “Consumers want this information in a snap of a finger, to find that gas station within a mile of their location. EDGE is more of a dial-up 3G,” he says. “Early iPhone users are going to be very frustrated when trying to get immediate information.”