Abstract

LBS have been available in China for a number of years. However, the market is still in its preliminary stages. Especially, the development of the individual user market has failed to meet expectations. Main reasons for this are an immature industry chain, high-priced terminal products, and insufficient demand.

Within the industry chain, electronic map companies, the cornerstone of LBS, are developing at a slow pace. This is because urban and rural areas are undergoing constant change because of construction. Another reason is that restrictions imposed on map producers have resulted in a small number of companies in this sector. Making maps requires a large amount of manpower and resources. A strong capital base is also needed for support. These limitations result in data that, whether in terms of quality or quantity, has trouble meeting standards required for LBS applications. Service providers intending to enter the arena must purchase information from map producers in order to provide services, but the high costs give pause.

There are still relatively few mobile communications terminals in the Chinese market with GPS functionality, and are also expensive. This is a great obstacle to those that want to use LBS services.

In terms of user demand, operators in China have not promoted abundant and easy-to-use LBS services, not to mention cultivating user habits. Another main factor that users consider regarding LBS is privacy. This may also be responsible for low demand.

Although many challenges exist, the rapid growth in the number of mobile communications users in China and a continuous increase in private automobile ownership have created a large potential LBS customer base with enormous room for growth. Under these conditions, businesses in the industry chain must continue promoting these services. Electronic maps that provide information on hundreds of cities are provided by companies such as Careland, LingTu and Ritu. In the realm of terminals, besides collaborating with telecom operators on GPS terminals, more than ten mobile phone companies including Motorola, Nokia, and MiTAC announced in January 2008 that they would significantly lower prices of mobile GPS phones jointly with GPS mobile navigation system company Careland. The prices would be as low as under 1,000 RMB (US$141.8). China Mobile and China Unicom are eagerly pursuing value-added services. Furthermore, with 3G services in China about to take off, networks and terminals will make it possible to provide better quality LBS. These two operators will therefore continue to make large investments to develop services attractive to consumers. It is expected that as each link in the industry chain continues to improve, the LBS services market in China will see steady growth in coming years.

Appendix

Glossary of Terms

List of Companies