Global Positioning System receivers are poised to play a "critical role" in wireless communications as a result of the United States Federal Communications Commission's E911 directive, and location based services are expected to follow on the heels of the mandate, according to tech research firm Frost & Sullivan.

 

The prolific analyst firm finds that successful E911/LBS products and services will "require products with features that can implement GPS in mobile telephones."

Frost & Sullivan's report, "Strategic Analysis of GPS Chipset Market," concludes that the market earned revenue of $207 million in 2004, and estimates it will reach $589.1 million in 2008.

 

The third generation of GPS receivers presently available already exhibits "significant gains in miniaturization, reduction in power consumption and portability" over the earlier models, and "this trend is expected to continue," says Frost & Sullivan Research Analyst S. Nagarajan.

 

"Surveying receivers are likely to decrease in size to fit into a car radio and then into a mobile phone. However, there is also a trend to pack more electronics into the receiver box," Nagarajan says.

 

Location-based services have been increasingly on the radar screen for a wide variety of carriers amidst much debate on how LBS initiatives can enhance average revenue per user and reduce churn. Revenue in this industry totaled $91.2 million in 2004, but some analysts think it can reach over $600 million by 2008.

 

"The variety and breadth of possible applications and services in LBS, from pure content and advertising, to emergency 911, navigational aids, social networking, and tracking services highlight its adaptability," explains Frost & Sullivan Industry Research Manager Brent Iadarola.

 

The miniaturization of much of the electronics (particularly the tracking channels) onto VLSI circuits means that less power is needed for the receiver to function. However, the challenge is to develop small, lightweight, long life batteries. There have been many predictions of low-cost GPS receivers.

 

Many handheld navigation receivers are available for just a few hundred dollars. It is doubtful whether the cost of GPS surveying receivers will ever fall below a level that is typically ten to a hundred times the cheapest receiver, for a number of reasons.

 

The small-sized, low-cost OEM receivers are well suited for developing new applications. Hence, miniaturization is one crucial factor for the development and penetration of GPS systems into the market.

 

The lower costs have become a reason for the slower and meager revenue generation for the GPS chipsets market. The sudden decrease in the prices and almost no increase in revenue generation in cases of GPS systems in mobile phones has put pressure on the vendors. This acts as a restraint in the growth of the GPS chipsets market. The cost of the basic GPS chipset has continued to decline steadily, leading to the relatively thin profits in high-volume consumer electronics.

 

High-margin GPS products tend to be those with specialized software content or where GPS provides crucial functionality. Demand for smaller handsets leads to reduction in form-factor and die size, which corresponds to an additional decline in the price of the transceiver chip.

 

"The growth of civil GPS applications and user equipment represents a very pure form of market competition in that GPS signals are provided as a free public good. There is no limit to the number of potential users and the marginal cost to the system of an additional user receiving a GPS signal is zero," says Nagarajan.