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How the Smartphone Is Killing the GPS Device

The auto navigation device, a fixture of dashboards around the world for the past seven years, may soon begin to disappear, industry experts say, as satellite-tracking technology is absorbed into smartphones and automobiles.

Nick Koudis | Photodisc | Getty Images

Berg Insight, a Swedish research company that tracks the navigation industry, estimates that the number of personal navigation devices shipped globally will peak in 2011 at 42 million, up from 40 million this year, before beginning a gradual, but inexorable decline.

Berg sees annual shipments of the devices, which fix location by communicating with global positioning satellites, falling to 30 million in 2015.

“The reason this is happening is basically the smartphone,” said Tom Slob, an analyst in Amsterdam for Rabobank, a Dutch bank. “Google and Nokia have both decided to give the technology away for free. That has changed the business.”

Whether competition from the mobile phone industry proves to be a fatal blow to the auto navigation market, however, remains to be seen.

The industry leaders, Garmin and TomTom , are fighting back, honing real-time traffic technologies and building in-dash navigators for automakers like Renault, Mazda and Fiat.

“The technology is being partially absorbed into smartphones and in-dash devices,” said Kevin Rauckman, the Garmin chief financial officer. “We are also seeing the industry mature very rapidly. But that in no way means the end of the road for our business.”

Regardless of how companies like Garmin ultimately fare, the uncertainty surrounding the personal navigation industry, whose devices began appearing on dashboards in 2003, is another example of the way smartphones are disrupting many consumer electronics businesses.

Apple has seen sales of its iPhone and iPad, both popular Internet-connected devices, cannibalize those of its iPod music and video players.

IPod sales peaked in 2008, one year after Apple introduced the iPhone, at 55.4 million units, according to figures released by Apple, and fell to 52.4 million last year.

Global shipments of digital cameras, another device now commonly integrated into smartphones, fell to 125 million units in 2009 from 140 million in 2008, according to André Malm, a senior analyst at Berg Insight in Goteborg, Sweden.

Mr.Malm said most of the decline probably had been caused by the global economic downturn but smartphones, some of which now come with 12-megapixel cameras, were definitely eroding sales of lower-end digital cameras.

Nokia , which sells about 106 million smartphones a year, now claims to be the world’s largest maker of digital cameras.

“There is no doubt that the smartphone is transforming many of these markets, not just navigation devices, but cameras and media players, too,” Mr.Malm said. “These markets aren’t going to disappear, but they are going to change substantially.”

The auto navigation business was humming along until October 2008, when Google introduced Android, an operating system for mobile devices that extended Google Maps and its navigation programs to cellphones.

Since then, 45 million people have bought GPS-enabled Android phones, according to Gartner, and many use them in their cars.

Not to be outdone, Nokia, which sells more mobile phones than anyone, began giving away its own navigation software, Ovi Maps, last January to its smartphone users.

Nokia sells about 290,000 smartphones each day around the world, 26.5 million in the third quarter alone.

The fallout from Google’s and Nokia’s decisions has roiled the industry, which is dominated by Garmin, based in Switzerland, the market leader; TomTom, based in Amsterdam; and Mitac International of Taiwan, owner of the Mio, Navigon, Magellan and Navman brands.

The three make up 68 percent of the market, according to Berg Insight.

Sales at Garmin, which has 35 percent of the global market, fell 11.4 percent in the third quarter to $692.4 million.

The company, thanks to $68.6 million in a one-time tax benefit, reported a 30 percent increase in net profit during the quarter, to $279.6 million.

Mr.Rauckman, the Garmin chief financial officer, attributed the downturns in part to competition from smartphones and in-dash devices, but also to the rising availability of GPS navigators in cars.

He estimated they were installed in 25 percent of the world’s 700 million cars.

At TomTom, the European market leader, sales rose 3 percent, to €375 million, or $512.4 million, in the third quarter, but the company’s net profit slumped 37 percent, to €19 million from €31 million a year earlier.

On Oct.20, TomTom said it expected 2010 sales and earnings to be unchanged from 2009.

Neither company is ceding the market to Google or Nokia.

TomTom is using anonymous location data from Vodafone cellphone customers in Europe to compile enhanced traffic reports for a dynamic traffic management service it sells in Europe.

Garmin has diversified beyond car navigators, generating a third of sales from aviation, maritime and fitness/outdoor devices.

Garmin, TomTom and Mitac also sell navigation tools as applications for the iPhone and BlackBerry .

Mr.Rauckman said smartphones could not compete with specialized navigators like Garmin’s Nuvi 3790LMT, which offers speech recognition and 3-D street displays.

“The user interface on our devices is much easier to use than a smartphone,” he said. “That is why people are willing to pay for our products.”

At a presentation to financial analysts Thursday in Amsterdam, the TomTom chief executive, Harold Goddijn, told investors his company was expanding its relationship with Renault, Fiat and Mazda, said Nicolas von Stackelberg, an analyst at Macquarie Securities in Frankfurt.

“Before, the outlook was rather uncertain, but it is brightening now,” Mr.von Stackelberg said. “The fear had been that nobody would need to buy a personal navigation device any more. And yes, there are some who will use their smartphones instead, but there are others who will still want to buy a high-end device from specialists like TomTom or do away with dangling cables and go for a reasonably priced in-dash solution.”

Tim Flight, editor of GPSReview.net, a Web site covering the industry, said it was far too early to write the obituary for auto navigation devices.

“A lot of GPS users are now buying their second device,” said Mr.Flight, who is based in Carrabassett Valley, Maine. “I’m sure the casual user might be satisfied with a smartphone, but people who rely on the devices are still going to opt for a real navigator.”

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