GPS navigates onto holiday wish lists

By Matt Vella

updated 6:55 p.m. ET Nov. 29, 2006

If all goes according to plan this holiday season, the constellation of global-positioning system satellites orbiting the planet will soon be talking to a wide array of newly unwrapped high-tech gifts, all of them designed to help users find their way from place to place.

Why the likely holiday surge in GPS-enabled devices? GPS equipment and services have been around for a long time. Navigation systems that offer GPS-based mapping and route guidance have been offered as add-on options by auto manufacturers for years. According to the Telematics Research Group, sales of those systems grew to 1.2 million last year and will likely balloon to 4 million by 2010.

But consumers are no longer waiting for the devices to be offered by auto manufacturers. Indeed, the market for personal navigation devices has exploded over the last two years. Those systems, made by the likes of Garmin, TomTom, and Magellan, offer the same features as those available in cars, but they're portable and cost anywhere from 50 percent to 80 percent less. The Consumer Electronics Assn. predicts that as many as 2.3 million such units will ship in the U.S. this year. Analysts say that would represent a growth of 100 percent from last year.

That growth is a reflection of the increasing popularity of a system developed in the 1970s by the U.S. Defense Dept., which continues to maintain more than two dozen satellites for public use. The network works like a broadcast radio station, receiving and sending location coordinates to GPS-compatible devices.

Another catalyst of growth is the falling price and improving performance of the computer chips that run the devices. "That chip that a few years ago cost $30 is now just $10," says Rich Valera, an analyst with Needham & Co. in New Jersey. "It's the economics of silicon — price comes down, performance goes up. The inexorable trend is, then, a proliferation of GPS devices."

Prices for popular portable navigation devices have dropped at the retail level as well, fueling demand. According to NDP Group, the average price of GPS systems dropped to $616 during the third quarter of this year. That's a drop of more than 30 percent, from an average of $863, since the same time last year.

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