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.

Market structure That fierce competition has served well to bring prices down. So, nowadays most players are sourcing their products from sub-manufacturers in China. However, this means that anybody can enter the market and source easily navigation devices, when the volume commitment is big enough.

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.

Market winners
For some time this strategy might work, but in the longrun it is not sustainable as we could learn from Samsung Mobile's experience: Samsung mobile phones increased market shares drastically, despite high prices, when clam shell phones with cameras were introduced to the market. Rivals like Nokia and Motorola did not have these features at that time. However, it took them eighteen months to follow and to regain their former market position. Therefore Samsung moved to the next technology: digital TV. This time consumer's were less responsive and Samsung mobile phones could not repeat the former success.

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.

Mobile phone
The combination of navigation with GPRS/CDMA technology is natural, so some navigation companies have started already to implement such modules.

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.

Notebook manufacturer
Since 2006 Microsoft and Intel are promoting ultra-mobile PCs (UMPCs) under the name of Origami. The UMPCs are Windows-based touch pads that weigh below 1 kg and have up to 7 inch displays. So far these devices were not successful in the market, maybe because the ordinary consumer cannot see an advantage to normal notebooks. However, major companies continue their investments to create a new market for that kind of computers.

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.

Automotive
From 2009 eCall will be compulsory for new cars in the European Union. This means that every new car has to have a GPS receiver and a GSM have a GPS receiver and a GSM module in order to transfer the location in case of an accident.

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.

Market change
Market entries from other areas will significantly change the navigation market: The low-end market will be taken over by mobile phones, the high-end market will be taken over by UMPCs while sooner or later the automotive industry will control the market.

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.

Map data
NavNGo has shown how to challenge the duopoly of Navteq and Tele Atlas: Although NavNGo is mainly a map software provider, it has a strong point in providing detailed geographic information for Eastern Europe. Especially in emerging markets new companies will challenge the current duopoly.

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.

New applications
Despite adding more attributes to maps, companies will need to add more software applications in order to differentiate from competitors.

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.

Interactive
As we see the World Wide Web developing to Web 2.0, there will be Navigation 2.0. Devices will become interactive: When driving I want to choose restaurants for taking a rest which have received good marks from other travellers. After relaxing and eating there, I want to give my own rating. I might even travel alone but do not want to eat alone. Eventually mobile communities will emerge.

More choices
Incumbent navigation software companies will not have to fight as much as the hardware companies to protect their business. The major fight will be about new geographic markets and new market segments won by new applications. It is still an open race and not decided yet which companies will provide successful solutions.

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

Enhanced view
Combined with other devices, some drivers like to use navigation systems for more safety in the car, especially when trailers are used. One or more cameras can be connected to the display, enhancing the driver's field of view and eliminating any blind angle.

Insurance
The faster you drive the more accidents happen. Therefore some insurance companies like Axa in Ireland and Unipol in Italy have started to give discounts to clients who do not drive over speed. Control is secured by a device with GPS and the capability of transferring data.

Traffic authorities
Last year the UAE has signed a $125 million contract with IBM to provide a traffic monitoring and speed-enforcing system in which a GPS-enabled device would be installed in cars to provide a voice warning if the driver exceeds the local speed limit. If the voice warning is ignored, the system would use a GPRS link to beam the car's speed, identity and location to the police so that a ticket could be issued. Probably there will be some more countries who would like to control their citizens. In the USA there is already a law which requires that every phone call shall be able to be localized, while the European eCall initiative has the same idea.

More safety
What has started with telling me where I am and in which direction I should go, has become an instrument for more safety. I might enjoy an enhanced view, while I might be against automatized ticket issueing for over-speeding; nevertheless, both applications follow the same trend. In the future we will see more In the future we will see more safety applications in combination with navigation systems.

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.

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