GPS chipmakers headed for more consolidation?

GPS World, July, 2008

Chip makers in the GPS market may face an uncertain future, as differentiators have become price and the ease of integration, according to market research firm ABI Research.

"The market for GPS semiconductors has reached a plateau," said principal analyst Dominique Bonte, ABI's principal analyst for telematics and navigation. "All GPS chips offer similar performance. That tends to make market success primarily a matter of price, and of ease of integration with the host devices." Consequently, semiconductor vendors who play in the GPS market might best ensure their continued ability to innovate by being absorbed into much larger IC manufacturers, the firm suggested.

At the same time there is a growing trend towards integrating GPS with other functions in a single chip. Bluetooth is the most popular initial candidate, and holds the key to the global wireless handset market that is critical to expanding navigation and location-based services markets, according to ABI. It cited the recent introduction of CSR's BlueCore 7 chip.

"[It is] the first solution integrating Bluetooth, GPS, and FM on a single chip," said Bonte. "BlueCore7 will be in volume production from Q4 2008, and more launches from other vendors are expected in 2009. Bluetooth manufacturers are already buying up smaller, independent GPS chipmakers in order to integrate their expertise into the larger Bluetooth market. And Wi-Fi is next on the list for integration."

Both these trends mean that the very large semiconductor players will ultimately take the lead in this market. They have the facilities to churn GPS ICs out in great quantities, reducing their cost, ABI said. They also have greater abilities to integrate multiple RF technologies in a single unit. "We expect to see Broadcom, Atheros, NXP, and Texas Instruments becoming more important as GPS chipset providers," Bonte noted. "The future of GPS-only chipset providers may prove limited, and companies such as SiRF, that pioneered this market, may need to be acquired, for their technologies to continue."

Other factors that may soon affect markets for positioning-system ICs are the deployment of Block III GPS satellites, which will offer better indoor coverage for location-based services, and the possibility of dualconstellation (GPS/GLONASS/Galileo) ICs that would mean improved visibility and positioning accuracy.