[Garmin Dominates the GPS Market]
Electronic Buyers News
28/12/2004
Pinpoint Production
Garmin has made it big in GPS, in part by building its own products. If "insourcing" works for Garmin, maybe it could work for your company.
By Arik Hesseldahl
The global-positioning system hardware business is much like any other consumer electronics sector. Crowded, fiercely competitive and highly price-sensitive, it sees new competitors popping up continually, ready to challenge the old guard.
What's more, very little about the core technology is proprietary. Signals from the 27 U.S. Department of Defense satellites are free and available to anyone. From that standpoint, GPS receivers should be a commodity product like AM/FM radios. And the leading companies should follow conventional wisdom and outsource everything to achieve the lowest possible cost.
And yet they're not commodity products. And no, the No. 1 company in the business does not believe in extreme outsourcing. Rather, top-ranked Garmin International Inc. regards its ability to bring its own manufacturing and engineering resources to bear on the production process as a strategic advantage, violating nearly every seemingly obvious rule in the book of cost control.
Just ask Min Kao, co-founder and CEO of Garmin, and he'll tell you how owning the manufacturing plants has helped Garmin capture a commanding market share in nearly every GPS product segment. The strategy has paid off with a gross margin above 50 percent and growing, Kao said.
Garmin makes GPS receivers that tell motorists, civil aviation pilots, hikers and boaters, where they are, and how far they are from where they're going. Last year, Garmin sold more than 2 million units, up half a million from 2002. Likewise, its revenue in 2003 was up 23 percent over 2002 while profits grew 25 percent.
Ron Stearns, an analyst with Frost & Sullivan, pegged the North American market for GPS products at $3.15 billion in 2003, and predicts it will more than triple to $9.5 billion by 2010.
Splitting the GPS equipment business into segments helps to demonstrate Garmin's dominant position. In the recreational handheld business-those GPS receivers aimed at hikers and hunters-Garmin enjoys a 70 percent market share, said analyst Peter Friedland of Fulcrum Global Partners.
Garmin also holds a 60 percent share in aftermarket automotive receivers, where it competes with Magellan, a unit of French Aerospace giant Thales, Netherlands-based Tom-Tom and Cobra Electronics of Chicago. In the marine business-GPS receivers used by boaters-it competes with Lowrance Electronics (Tulsa, Okla.) and New Zealand's Navman. Garmin's share for the sector hovers between 30 and 40 percent, said Fulcrum's Friedland.
But Garmin truly shines in civil aviation, where the "Garmin stack"-a combination of GPS navigation and communications equipment-is the gold standard among pilots and plane manufacturers. Its market share there is about 90 percent, with Honeywell its only real competitor, Friedland reckons. Garmin's latest aviation product, the G1000, combines location, navigation, communication and identification data into large flat-panel displays.
openoutsource.com
In summary, Garmin’s market share:
· Civil Aviation: 90% - with Honeywell its only real competitor. Garmin's latest aviation product, the G1000, combines location, navigation, communication and identification data into large flat-panel displays.
· Recreational handheld: 70%
· Automotive after market: 60% competing with Magellan, a unit of French Aerospace giant Thales, Netherlands-based Tom-Tom and Cobra Electronics of Chicago.
· Marine: 30-40%, competing with Lowrance Electronics (Tulsa, Okla.) and New Zealand's Navman. |
