Navigation on Smart Phones: Who Needs a PND?

iPhone to get TomTom and Navigon applications.

With a growing range of navigation applications on large-screen smart phones such as the iPhone, the Portable Navigation Device (PND) is now under considerable threat as a stand-alone dedicated device, according to iSuppli Corp.

So far, the impact of navigation-capable handsets/smart phones on the PND market growth has been low, but iSuppli believes this is set to change with the launch of high-profile navigation applications from TomTom and Navigon for the iPhone.

Previously, handsets were not seen as a threat to the dominance of the PND due to poor battery life, unclear pricing structures and small displays. However, as smart phone design moves forward, many of these issues have been or will be resolved, leading to increased market share for navigation applications on phone handsets.

There are four theoretical user groups that make up the portable navigation landscape. Overall user group findings include:

* Free map-based application downloads on smart phones are increasing substantially.
* It is highly possible that low-end PND users would transfer to smart-phone navigation applications such as the iPhone, which will be able to provide PND-like features on a similar screen size with off-board connectivity.
* Moderate usage, but tech savvy Turn-by-Turn (TbT) phone navigation app users are likely to choose smart-phone navigation applications over a dedicated PND to take advantage of the multi-function nature of the device.
* For high-usage but price-sensitive low-end PND users, PND navigation vendors will have to carefully position their smart-phone products to ensure they do not compete against their own dedicated PND products.
* The high-end PND user group understands sophisticated navigation features and enjoys advanced driver-centric features. While the more price-sensitive users within this group may migrate to a smart phone handset, dedicated users would expect more advanced driver-centric features from connected PNDs, with competitive service fee offerings.
* PND owners are typically higher frequency users when compared to the current phone-handset user group.
* Phone handsets are not dedicated navigation devices. As a result the user preference is suited to occasional navigation use only.

Inevitable Navigation
The challenges created by smart phones are significant for PND manufacturers. The rise of navigation on smart phones is inevitable for a whole range of reasons, including the integration of GPS functionality in a high percentage of handsets, better usability on larger touch screens and built-in connectivity for system upgrades ,allowing bundled services to make best use of flat-rate data contracts.

Furthermore, the decision by Apple to support navigation apps from Navigon and TomTom will ensure demand shifts away from the dedicated PND and toward the multifunction handset.

TomTom last week finally announced the availability of TomTom for iPhones. Now, Apple has six onboard and two off-board real-time TbT navigation applications available on the iPhone since launching a new Operating System (OS) in June. The initial reaction from iPhone users is encouraging to the application suppliers, as Navigon’s application ranked within the Top-5 of the most purchased applications on iTunes in Germany with its launch and TomTom’s quickly shot to the No.-4 slot in paid navigation apps on the App Store. Interestingly, with the launch of its iPhone app, TomTom said that it still sees robust demand for PNDs going forward and that the iPhone app represents an opportunity to grow, not a threat, especially in the short term. PNDs represent 80 percent of TomTom’s current business, but that may shift as smart phones become a bigger part of the market.

Among iPhone navigation users, iSuppli believes that the take-up rate of onboard navigation will not be as fast as that of off-board navigation, particularly in 2009 and 2010. Clearly, off-board navigation suppliers have considerably more experience in smart phone applications than the relatively new onboard navigation application providers. Also, the established off-board players will benefit from better legacy relationships with cell carriers. However, with PND-like advanced features and user preferences for one-time purchasable applications, onboard navigation services will pick up more users over time.

From 2004 on, the PND market continued to exceed all expectations in terms of growth and popularity. Nevertheless, iSuppli forecasts that 2009 will be a watershed year for PNDs as they move from the growth phase to the maturity phase in their life cycle. iSuppli believes that in 2011, the attach rate of GPS functionality on smart phones will reach nearly 100 percent, while better microprocessor support, higher internal flash memory and improved battery life will stimulate this market choice at the expense of the PND. By 2012, users will see the smart phone as a major navigation device, with feature sets and functionalities similar to mid-range PNDs.

The two major PND vendors will maintain very similar market shares in the PND space into 2013. iSuppli forecasts that TomTom and Garmin’s in-use PND unit shipments (based on a three-year life span) will not significantly change between 2009 and 2013. However, smart-phone navigation is likely to cannibalize at least part of the PND market. Any new growth in PND shipments is likely to come from the Asia-Pacific region, where past map coverage has been patchy, but is improving. During this time frame, iPhone navigation users are expected to increase from just 2 million users in 2009 to 28 million in 2013.