It took years to squeeze GPS function down onto a single chip and bring it to the attention of the global cellular community, but right now there is probably no better selling point for handsets than location aware services, enabled by GPS.
Originally location awareness was supposed to come about using triangulation services in a 3G network, but so few customers shifted early enough to 3G to make that viable and that opened the way for GPS chips.
But given that GPS techniques are now such a key differentiator for the chip industry, and given that the market took off rather suddenly, legal actions over intellectual property are bound to emerge, because there’s a lot of money at stake.
US researcher In-Stat reckons that there will be as many as 720 million GPS chip units shipped in 2011 and 180 million now, and rival ABI Research says that the chips are falling to around $3.50 apiece in volume this year
That makes the market something like $550 million already and rising, to something over $1 billion by 2011, so it must be frustrating for a company like SiRF which has spent the past 7 years working on GPS chip technology to see giants like Broadcom and NXP entering the race for GPS leadership.
But a legal action that SiRF Technology has brought against Broadcom alleging patent infringement has just been set aside by the US International Trade Commission which rejected claims that two of its GPS patents were infringed by Global Locate.
Broadcom went out and bought Global Locate just a year ago for $146 million and one of the things it was on the lookout for was a strong patent portfolio with over 175 patents issued and pending and its offering of both baseband and radio integrated on a single CMOS chip.
SiRF went the other route, and was little more than a start up in 2001 when it bought the GPS assets of Conexant, at a time when the US chipmaker was under pressure. We’re not sure what it paid but up to that point SiRF had only raised some $60 million and went on to raise a further $19.6 million, straight after the deal. Today SiRF is a $330 million revenue, profitable company.
NXP also bought its way into this sector paying some $85 million for GloNav in December last year.
The ITC case also showed one of SiRF’s patents as not valid and Broadcom also has a reverse case against SiRF which will go to court in August.
This reversal on SiRF’s patent claims seems to imply that the business will be rapidly overtaken by these two majors and that it may well need to seek a larger home, as the margin falls out of the GPS chip business and economies of scale rule the day.