Smart Phones Become the New LBS Battleground

24 June 2010

With smart phones emerging as the strategic computing platform for the next decade, the usage of smart-phone-based OEM and aftermarket on-board navigation systems is set to soar by a factor of 10 in 2010 and boom by nearly fortyfold in 2014, iSuppli Corp. predicts.

The number of smart-phone-based OEM and aftermarket on-board navigation systems is projected to rise to 81 million units in 2010, up from 8 million in 2009. By 2014, usage will increase to 297 million.

Smart phones over the next decade will rival PCs as a market for hardware, software, communications and location based services (LBS). In the last two years alone, the smart phone has become the most important platform for map and navigation usage, according to iSuppli.

With maps becoming a standard feature in a growing number of smart phones, the number of smart phone map users is increasing sharply. The smart phone is also rapidly pioneering new LBS applications and is likely to generate many innovative LBS apps in the next five years.

iSuppli believes this because:

  • Apple Inc.’s iPhone is the most successful LBS battleground so far with more than 6,000 LBS apps available.
  • The iPhone’s dominance is primarily in the aftermarket downloadable navigation application market.
  • Nokia Corp. and Android devices will lead the OEM preloaded navigation application market.

Smart Phone On-Board Navigation Market: OEM vs. Aftermarket
Navigation software can be included by smart phone manufacturers and embedded into the smart phone—an approach iSuppli calls OEM on-board smart phone navigation, similar to the terminology used in the auto industry. Most on-board navigation software will be included as a feature by smart phone manufacturers and preloaded onto the device. To this end, OEM or preloaded on-board navigation will be the largest segment of the overall market for on-board smart phone navigation, driven mainly by Nokia.

Navigation applications also can be downloaded by the smart phone user after the device is purchased, a model iSuppli terms as aftermarket on-board smart phone navigation. While the segment is much smaller, aftermarket on-board smart phone navigation is expected to get a big boost in 2010 given that Nokia made available its Ovi Map with turn-by-turn navigation a free download earlier this year. More than 10 million Ovi Map navigation applications were downloaded in the first quarter, although download volume in the second quarter will decline because Nokia already has preloaded the navigation application on all of its smart phones.

Most of the paid aftermarket on-board activities are currently on the Apple iPhone, since navigation is not a preloaded app. To date, the iPhone accounts for nearly 50 percent market share of the total number of aftermarket on-board navigation sales, estimated at more than 2.9 million applications in 2009.

A Large Opportunity
Such numbers offer considerable opportunity for navigation software companies. And because Apple gets 30 percent of the navigation app retail value, the business model also benefits Apple significantly. In 2010, the iPhone on-board navigation market is forecasted at 5.8 million units with an average price of at least $50 per app, which translates into around $290 million in retail value or approximately $87 million for Apple.

In contrast, Nokia receives no revenue for its preloaded Ovi Map navigation software. Because Nokia owns its map supplier, Navteq, Nokia can afford to give away a free navigation program. Other smart phone companies will also need a low-cost map source to compete with Nokia’s free navigation application.

The increasing availability of low-cost maps will allow many smart phone manufacturers to offer free preloaded on-board navigation software as the open-source maps expand their coverage. Such availability means that aftermarket on-board navigation will see a declining market share in smart phones.

Read More, Smart Phones: The New LBS Battleground >

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