Sierra Wireless (NASDAQ:SWIR) has made a low-key entry into the global navigation satellite systems (GNSS) chip market by acquiring Taiwan-based GlobalTop Technology's GNSS embedded module business for $3.2 million. The Internet of Things (IoT) specialist will integrate the acquired assets into its OEM (original equipment manufacturer) solutions segment as it tries to boost this segment's flagging sales.
Sierra's OEM solutions business is 84% of its revenue, and lower demand from key customers led to a 1.3% drop in sales in 2016. Not surprisingly, the company is looking at ways to bring OEM solutions back on track, and its latest acquisition seems like a step in that direction.
Why Sierra wants to get into GNSS chips
The demand for location-based services such as navigation and telematics is increasing thanks to applications such as connected cars, wearable devices, and drones, creating the need for GNSS chips that enable location tracking. Sierra Wireless doesn't want to miss this gravy train as Research and Markets expects the GNSS chip market to grow at almost 8% a year, exceeding $5.2 billion in revenue by 2022.
GlobalTop is Sierra's ticket to this ride as it will add value to its existing IoT product portfolio that includes cellular, Bluetooth, and Wi-Fi solutions. More specifically, GlobalTop's GNSS chips could help Sierra push additional sales to its clients in the areas of automotive and freight management since it has offerings for both of these applications.
For instance, Sierra might cross-sell GlobalTop's modules through its existing sales channels to its automotive customers such as Volkswagen, which is using its high-speed cellular modem to enable secure connectivity in its cars. What's more, GlobalTop will also strengthen Sierra's telematics product portfolio, thanks to its expertise in vehicle tracking.
Sierra is aggressively focusing on the telematics market though embedded solutions such as its AirPrime cellular modules and the Legato software platform to connect vehicles to the cloud. GlobalTop's embedded modules will complement Sierra's ongoing effort in this field and help it offer a more comprehensive product line to customers.
More importantly, Sierra shouldn't find it too difficult to integrate GlobalTop's modules into its product line since the latter is known for creating GNSS chips with a small footprint. For instance, GlobalTop's recently launched Titan X1 multi-GNSS patch module is one of the smallest embedded antennae, according to GPS World, while still offering full functionality.
What about the competition?
Sierra Wireless, though, will face a tough road thanks to its late entry into the GNSS space. Qualcomm (NASDAQ:QCOM) has the lead in GNSS shipments and innovation, according to ABIresearch, and is looking to tighten its hold over this market by partnering with the likes of China's Baidu.
The American chipmaker is integrating Baidu's IZat hardware location platform into its Snapdragon chips to enable low-power location services on Baidu Maps, while also targeting the automotive market with its Snapdragon X16 LTE modem that's based on a GNSS platform. Qualcomm is ahead of Sierra in this market as it already has a system that integrates cellular connectivity and location-based services.
It is evident that Sierra's entry will not change the balance of power anytime soon as GlobalTop is not a very big player in the GNSS space: It pulled in just $5 million in revenue last year. By comparison, the GNSS chip market was worth around an estimated $3 billion last year.
Sierra has a long way to go before it can make a dent in GNSS chips. But it won't be surprising if this market helps its OEM solutions business get back to growth, thanks to a possible integration of the GNSS modules with its LTE cellular modules. For instance, Volkswagen will start deploying Sierra's 4G modules into its cars next year, indicating that there's still some time for the chipmaker to gain additional content.