PNDs Cut into Car Navigation Market

location based services

Nikkei Electronics Asia -- August 2007
The huge increase in sales of portable navigation devices (PND) has made an impact on the car navigation market, which now looks set to split into two areas: low-priced PNDs, and high-function HDD-based systems.
"PNDs just swiped the market right out from under us," complained a management-level source at one Japanese car navigation system manufacturer. It would be no exaggeration to say that in Europe, "car navigation" means PNDs. Equipped with a 5-inch or smaller liquid crystal display (LCD) panel and Flash memory holding map data, these simple car navigation systems provide guidance via map displays.
As of 2004, the total worldwide sales of PNDs reached only several hundred thousand units annually. This jumped to over five million in 2005, and again to over 10 million the following year, surpassing the installed car navigation market in which the Japanese car navigation system manufacturers had been doing so well.
The PND market is presently driven by TomTom NV of the Netherlands, Garmin International Inc of the US and MiTac International Corp of Taiwan. Of these, the first two firms command 60% or more of the market, and together with MiTac International hold about 80% (Fig 1). PND demand shows no signs of slacking off and, one PND manufacturer said, "There are signs that it's going to be a big hit in the US in 2007, following its success in Europe."
According to Fuji Chimera Research Institute Inc of Japan, the PND market will grow to close to 20 million units a year by 2010 (Fig 2). Annual worldwide automobile production is about 65 million units, and if only about 30% of these adopt PNDs it would mean over 20 million units/year. And when you stop to consider that there are over 800 million cars on the road around the world that do not have car navigation systems, it seems clear that there is plenty of room for growth in the PND market.
The situation is beginning to change in Japan, too, where until now consumers have only bought installed car navigation systems displaying high-resolution maps on large screens, such as digital videodisc (DVD) or hard disk drive (HDD) systems. From about 2005, manufacturers not involved in car navigation systems - such as Edia Co Ltd, Original Kohgei Co Ltd and MiTAC Japan Corp, all of Japan - began marketing PNDs in Japan, attaining annual sales of tens of thousands of units annually. With their success, car navigation system manufacturers like Sanyo Electric Co Ltd, Sony Corp and Clarion Co Ltd, all of Japan, released PNDs from the end of 2006. The Japan market is beginning to take off, and is sure to hit at least 500,000 units a year in 2007.
Polarizing MarketWith the appearance of PNDs, the car navigation market seems likely to split into two camps: high-priced HDD-based systems and low-priced PNDs. Systems based on compact disc (CD) media are already effectively extinct in Japan (Fig 3), and several sources in the industry advise, "It's only a matter of time until DVD systems vanish, too." As the price of Flash memory continues to plunge, it seems reasonable to assume that DVD-based systems will be replaced by PNDs from the viewpoint of storage capacity as well.
That is not to say, however, that all car navigation systems will be replaced by PNDs. The ratio of new cars that come with factory-installed HDD systems is rising every year, creating a sizeable market centered on high-grade cars. In this particular sector, the interrelationship between car navigation systems and automobile control systems is deepening.
Car navigation systems will almost certainly meld with wireless-based safety systems (the ITS, or Intelligent Transport System, concept), such as shift control linked to the car navigation system or checks for obstacles behind the vehicle. As a result, there is a good chance that there will be a global shift toward a polarization worldwide: multi-function HDD-based systems integrated with the vehicles and promoted by the automobile manufacturers on the one hand, and inexpensive, high-growth PNDs on the other.
How the Japanese car navigation system manufacturers respond will be crucial. Will they keep on supplying the merchandise market with high-grade systems designed for installation in vehicles and providing multi-function systems to the automobile manufacturers under original equipment manufacturer (OEM) contracts, or will they take an active role in the rapidly-growing PND market?
Car navigation system manufacturers including Alpine Electronics Inc of Japan, Clarion, Sanyo Electric, Sony and Pioneer Corp of Japan already sell PNDs in markets outside Japan, but different firms seem to have different feelings about the product sector.
While some companies in the field position PNDs as entry-level devices destined to be replaced by installed models at the next upgrade, and therefore are not too excited about the rapid growth in the European market, other companies (like Sony, for example) take a different view. "The PND market only took off two or three years ago, and there is still an excellent opportunity for us to expand our market share." In industrializing nations there is already a move to make PNDs available as options, offered by the automobile vendors, and a number of car navigation system manufacturers are actively developing the market. Generally speaking, it looks like car navigation system manufacturers with small shares of the installed system market, including OEM supply to automobile manufacturers, are aggressive in the PND market, while manufacturers with large shares of the installed system market are less so.
PND Born from PDAOne of the reasons for the spectacular success of the PND in Europe has been the price, which has fallen to 500 euros or less. There are two reasons for the price drop, the first of which is that the PND has the same specifications as the personal digital assistant (PDA). Most of the PNDs available now have pretty much the same hardware and software as PDAs running the Windows CE operating system from Microsoft Corp of the US, with the exception of the case. This means that the core parts of the PND can be purchased inexpensively from electronic manufacturing services (EMS) and other subcontractors now manufacturing notebook personal computers and PDAs in Taiwan or Korea, for example.
The other reason is that PNDs only store the absolute minimum map data, car navigation application, etc. Map data is stored to a 512MB Flash memory, capacity smaller than that offered by a CD-read only memory (CD-ROM) disc, and detailed street maps are omitted. This approach makes it a lot less expensive to create the map data.
These inexpensive PNDs began to sell well in Europe, and established a positive feedback loop... volume production scale effects dropped the costs of terminals, key components, etc, leading to some PND devices at street prices of under 400 euros, while other models kept the price but began to offer enhanced map data, traffic information updates and other functions to stand out from the competition. The entire PDA market has become quite a bit more active as a result.
Japanese car navigation system manufacturers have made efforts to expand sales, but the systems they offer are quite expensive - 2,000 euros or more.
Defining a Niche The increase in the number of companies in the sector is rapidly intensifying the competition to define or grab product niches. As a result, PNDs are evolving with a speed significantly faster than that of conventional car navigation systems.
As the price of Flash memories has been dropping, storage capacity has risen from about 512MB a year ago to 2GB, representing an almost four-fold increase for more map, search and other data. PNDs are highly mobile, and because most of them run Windows CE, Linux or other OS, they mesh wonderfully with the network environment. This networking performance is leading a whole new set of functions for map update, real-time information reception, etc.
TomTom offers the TomTom PLUS information provision service for a fee, implemented through mobile phones and other devices. Among other things, it includes weather reports, real-time traffic information and map data updates. Driving information will be acquired via the mobile phone and processed for dissemination as real-time traffic information in a new "probe information" service announced in October 2006. Similar functions are offered in Japan only by top-of-the-line installed systems, but the PND already has it.
TomTom is also to implement these advanced functions because it holds a large share of the PND market. TomTom, Garmin International and others have performance of three million or more systems a year, and that constitutes a major weapon all in itself. Volume production scale can be leveraged for advantages in price-cutting competition, and it is possible that large sales of PNDs with probe information, for example, could end up as part of the driving architecture.
High PrecisionThe only way that Japanese car navigation system manufacturers can hope to compete in the world market is to fully utilize the advanced car navigation technologies they have developed for Japan.
Alpine Electronics and Fujitsu Ten Ltd of Japan are trying to find effective ways of melding the PND with the audio-visual (AV) unit in the car, hoping to leverage their strengths. Both firms offer AV units with high-precision vehicle positioning functions, implemented by adding a GPS receiver and detecting the vehicle's acceleration pulses to boost position precision above what can be achieved by the PND alone.
Their ideas on how to integrate the PND and the AV unit, however, are quite different. Alpine Electronics mounts the PND inside the AV unit, while Fujitsu Ten purchases PNDs from TomTom and uses the AV unit's display.
Alpine Electronics began selling its Blackbird PND in the US in spring 2006. The latest model, the PMD-B200, was released in May 2007 together with the IVA-W205 AV unit (Fig 4).
Pressure SensorsAlpine Electronics and Fujitsu Ten are utilizing the high-precision positioning technologies gained through installed car navigation systems in their AV units in combination with PNDs, hoping to carve out product niches, but Sony is instead enhancing the positioning precision of the PND itself. As part of its corporate restructuring effort it halted production and sales of automotive equipment in Japan in March 2006, but figuring that it could leverage its unique characteristics in the PND, the firm released the nav-u NV-U1 PND (Fig5) to the Japan market in March 2007.
Sony's PND is unique in that it has the "Position plus" positioning function, with precision enhanced through atmospheric pressure and acceleration sensors. In addition to standard GPS measurement, Position plus also uses the atmospheric pressure sensor to determine vehicle elevation and the acceleration sensor to determine direction of travel to correct the route display in places where GPS reception is unstable, such as in tunnels or building shadows.
Single-Seg BroadcastingSanyo Electric has introduced single-segment broadcasting reception as a means of making its PNDs stand out in the market. Sanyo Electric was the first Japanese car navigation system manufacturer to release a PND to the domestic market, in November 2006. Its decision to implement a single-segment broadcasting reception tuner from the start paid off, with a delivery performance of 70,000 units in only a little over four months, as of the end of March 2007. Determined to play their initial success into a leadership role, the company released two new PND models with added functions in April 2007, only five months later. The new designs also stress single-segment program viewing, but have doubled Flash memory capacity for map data to 2GB. This has made it possible to boost the quantity of stored addresses from about 1.8 million to about 30 million, achieving a "searchable address count equivalent to that offered by a DVD-based car navigation system," said a source at the firm.
The top-of-the-line NV-SB250DT is the firm's first PND to come with Li-ion rechargeable batteries (Fig 6). Until now, an external battery unit has been needed to drive single-segment program viewing.
Price a Constant IssueOne strategy in PND development as functions improve is to maintain price while improving the variety and ability of implemented functions, as evidenced by the success of Clarion (Table 1). The firm released the DrivTrax DTR-P5 PND to the Japan market in April 2007, featuring 2GBs of map data with a street price of only about Yen50,000.
Clarion believes that low-priced PNDs will drive the market in Japan as well. Japanese automobile sales volume is shifting toward compact and small models, and president Tatsuhiko Izumi of the company believes they will eventually account for over half the new car market. If that does indeed happen, there will be strong growth in low-priced PNDs. In addition, only about 35% of Japanese households currently have car navigation systems, and (according to Clarion's Izumi) there is no low-priced car navigation system to address that demand. He hopes to push his low-priced solution to consumers who feel existing systems are too expensive.
Clarion is using non-Japanese EMS manufacturing instead of handling it in-house to keep costs down. The company will commonalize new PNDs and terminals sold in the US and Europe in 2007, aiming to further cut costs through production scale effects.
MiTAC Japan, the Japanese subsidiary of MiTAC, which owns the third-largest piece of the global pie, is supremely confident in its low-cost strategy in PNDs. It began selling PNDs in Japan in June 2006, and in April 2007 released the Mio DigiWalker C323 especially designed for automotive use. As with the PND designed by Clarion for the Japan market, it uses car navigation applications and map data from Increment P Corp of Japan.
by Kouji Kariatsumari
Websites:Alpine Electronics: www.alpine.comClarion: www.clarion.com/jp/enFuji Chimera Research Institute: www.fcr.co.jp/enFujitsu Ten: www.fujitsu-ten.co.jp/englishGarmin International: www.garmin.comIncrement P: www.incrementp.co.jp/englishMicrosoft: www.microsoft.comMiTAC International: mitac.mic.com.twPioneer: pioneer.jp/index-e.htmlSanyo Electric: www.sanyo.comSony: www.sony.comTomTom: www.tomtom.com