u-blox buys Neonseven: A traditional Commodity model for GSM/GPRS?

u-blox buys Neonseven: A traditional Commodity model for GSM/GPRS?

GPS and mobile communications are essential capabilities of any telematics solution. For a couple of years now, the manufacturers of wireless modules have been offering converged GSM/GPS modules. They have had trouble maintaining margins on the price of the converged package because everyone in the industry has knowledge of the market prices for the individual components and the wireless module companies have done a poor job of communicating any increased value that is provided by the converged offering.

Last week, u-blox, the GPS solutions provider announced that it was acquiring Neonseven, an Italian based company that provides design and development services in the wireless communications space. This announcement was released on the same day that u-blox announced the launch of a new GSM/GPRS/GPS surface mount module. It’s not too much of a stretch to imagine that the previous week’s announcement of the SiRF /CRS merger is intended to deliver similar solutions and value to the market. Because of the commercial challenges experienced by the wireless module companies in maintaining margins, it will be interesting to see if a converged offering brought forward by a GPS focused company will fare any better. These acquisitions /mergers also expands the number of companies providing such offerings, theoretically causing further commoditization and price erosion for all players, regardless of the industry in which their legacy resides.

Plainly speaking, GPS solutions have been perceived as commodities by OEMs and Tier 1s for a while now and wireless communications modules are rapidly achieving the same perception. I guess that we are about to find out what happens when two distinct industries try to increase the value of their offerings by assembling two commodities into a single offering.

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