The case of Sirf

Monday, July 30, 2007

While I will continue to write about the integration of wireless technologies, in this article I wish to digress a little bit to discuss a company that might be impacted by such technology consolidation - SiRF.

SiRF, as I have briefly hinted in a previous article, like many other companies finds itself at cross-roads now. It has been the leading GPS chip-set maker supplying to almost all the major GPS vendors. Most Garmins and Tom-Toms that we would pick from store-shelves have SiRF inside. This being said, I wish to make a bold statement: SiRF will find itself marginalized and out of business if it does not diversify into other wireless technologies or strive to have a tie-up with a cellular or WLAN provider.

First and foremost reason is the recent spate of interest that the wireless companies have shown in small GPS firms. BroadCom, after surfing the waves for a while, decided to pick Global-Locate for its GPS needs. I am sure that other companies like U-Nav are up for grabs. Watch out for Marvell or Free-scale, as they are likely to pounce on such companies too if they come cheap enough. This puts SiRF with around $2 billion of market cap in a weird situation: While most of these wireless companies prefer to buy cheap and then build on it using internal resources, SiRF is too big to be acquired.

Secondly, is this concept of grabbing the most silicon in a platform. The wireless companies, with their own solutions, are likely to be better positioned to be able to achieve this than SiRF. SiRF will have to eventually come up with its own "bundle" if it has to be attractive to platform vendors. It has indeed made some strides with DVB-H and also media capabilities with the acquisition of Centrality. But, that still is only a limited number of eggs in its basket. Snapdragon, for example, offers DVB-H, SMDB and Media-Flo all in a bundle for the vendor to be able to pick-and-choose based on the market.

Thirdly, it is the "keep the Bill of Materials (BoM) low" thought. Any algorithm is good only to the point of making economic sense. SiRF's path-breaking algorithms are no longer attractive at the form-factor and costs being discussed in the mobile world unless it can leverage its technological leadership in the GPS field to always stay ahead. It would have to give a cheap and good product while also keeping the time-to-market low for the OEM.

Some may argue that all is not bad for SiRF. After all, its GPS expertise extends beyond mobile applications. The form-factors dictate algorithmic limitations with mobile phones, a situation not true for other devices. This, they argue, implies that the mobile GPS services are unlikely to supplant the market for the traditional GPS devices. My point is that technology as a whole is gravitating to a single device that can do most functions, not necessarily in an optimal sense. As an end-user, I would rather buy a single device that can do GPS, perhaps blue-tooth while along with being a cell-phone rather than buy 2 or maybe 3 devices separately. Note that I am not talking about having Wi-Fi and other data-related technologies that could further the attractiveness of such a unified device.

So, in summary, I think that if SiRF is not able to make strides in the mobile world in terms of getting a major customer or by diversifying, it runs the risk of being marginalized. If the future is in cellular mobile communications, and each cellular company has its own GPS solution, then it is only a matter of time before the concerted research and development of mobile GPS devices fructifies and begins to displace traditional GPS devices.

Posted by Vijay Nagarajan at 11:23 PM  

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