Navigation Expected to Become Killer Application for China's Mobile Market, says iSuppli

Because of strong demand for navigation services from Chinese consumers, manufacturers in the nation are developing handsets supporting the Global Positioning System (GPS). Meanwhile, wireless service operators see navigation as a key value-added service that can help offset their declining Average Revenue per User (ARPU).

With falling Average Selling Prices (ASPs) for GPS handsets, domestic GPS handset shipments will rise to 16.5 million units in 2011, more than 10 times the 1.4 million in 2007, iSuppli Corp. predicts.

Both China Mobile and China Unicom began to provide navigation services this year. The two operators have partnered with digital-mapping, handset and chipset suppliers to bring GPS to the mobile market.

In contrast to dedicated Personal Navigation Devices (PNDs), GPS handsets receive mapping data through wireless networks to provide navigation. Therefore, GPS-enabled handsets do not need to embed mapping data—only free GPS navigation software.

At present, the typical monthly fee for mobile navigation services is $2.50 per subscriber with 5Mbytes of data throughput included. As an option, consumers can install complete maps into their GPS-enabled handsets to use the navigation service. In this case, the GPS-enabled handset only needs to retrieve specific data on longitude, latitude and altitude directly from orbiting GPS satellites. The optimal route to the user’s destination is then displayed based on Geographical Information System (GIS) software and on the digital map installed.

“The greatest barrier to the mass-market adoption of GPS-equipped handsets is their high selling prices,” said Kevin Wang, Senior Analyst for China research for iSuppli. “By the end of 2006, GPS handsets were mainly high-end smart phones costing more than $700.” Major suppliers last year included Taiwan-based MiTAC with its model Mio A701 handset and Dopod with its model P800 handset.

iSuppli expects that navigation will become a killer application for the mobile industry in China. Volume shipments of GPS handsets will increase demand for related integrated circuits, such as GPS chipsets and multimedia processors.

However, with new competition coming from Taiwan-based fabless companies, the price of GPS chipsets is expected to fall quickly in early 2008. With intensifying competition between Taiwanese, Korean and Chinese multimedia chip suppliers, the cost of GPS phones will continue to decline this year.

www.isuppli.com