Garmin is a leading, worldwide provider of navigation, communication and information
devices and applications, most of which are enabled by Global Positioning System
(“GPS”) technology. Garmin designs, develops, manufactures and markets
a diverse family of hand-held, portable and fixed-mount GPS-enabled products
and other navigation, communications and information products for the automotive/mobile,
outdoor, fitness, marine, and general aviation markets.
The Global Positioning System is a worldwide navigation system which enables
the precise determination of geographic location using established satellite
technology. The system consists of a constellation of orbiting satellites. The
satellites and their ground control and monitoring stations are maintained and
operated by the United States Department of Defense, which maintains an ongoing
satellite replenishment program to ensure continuous global system coverage.
Access to the system is provided free of charge by the U.S. government.
Prior to May 2000, the U.S. Department of Defense intentionally degraded the
accuracy of civilian GPS signals in a process known as Selective Availability
(‘‘SA’’) for national security purposes. SA variably
degraded GPS position accuracy to a radius of 100 meters. On May 2, 2000, the
U.S. Department of Defense discontinued SA. In a presidential policy statement
issued in December 2004, the Bush administration indicated that the U.S. does
not intend to implement SA again and is committed to preventing hostile use
of GPS through regional denial of service, minimizing the impact to peaceful
users. With SA removed, a GPS receiver can calculate its position to an accuracy
of approximately 10 meters or less, enhancing the utility of GPS for most applications.
The accuracy and utility of GPS can be enhanced through augmentation techniques
which compute any remaining errors in the signal and broadcast these corrections
to a GPS device. The Federal Aviation Administration (“FAA”) has
developed a Wide Area Augmentation System (‘‘WAAS’’)
comprising ground reference stations and additional satellites that improve
the accuracy of GPS positioning available in the United States and most of Canada
and Mexico to approximately 3 meters. WAAS supports the use of GPS as the primary
means of enroute, terminal and approach navigation for aviation in the United
States. The increased accuracy offered by WAAS also enhances the utility of
WAAS-enabled GPS receivers for consumer applications. The FAA announced on July
11, 2003 that the WAAS system had achieved initial operating capability and
that the system was available for instrument flight use with appropriately certified
avionics equipment. Since that time, the FAA has installed additional ground
reference stations and has launched additional WAAS satellites.
Japan’s MTSAT-based Satellite Augmentation System (“MSAS”)
achieved initial operating capability for en route, terminal and approach navigation
for aviation on September 27, 2007. The European Geostationary Navigation Overlay
Service (EGNOS) aviation Safety of Life (“SoL”) service achieved
initial operating capability for en route, terminal, and approach navigation
on March 2, 2011.
Products
Garmin has achieved a leading market position and a history of growth in revenues
and profits by offering ergonomically designed, user-friendly products with
innovative features and designs covering a broad range of applications and price
points. Garmin’s target markets are currently broken down into its five
main business segments – automotive/mobile, outdoor, fitness, marine and
aviation.
Research and Development
Garmin’s product innovations are driven by its strong emphasis on research
and development and the close partnership between Garmin’s engineering
and manufacturing teams. Garmin’s products are created by its engineering
and development staff. Garmin’s manufacturing staff includes manufacturing
process engineers who work closely with Garmin’s design engineers to ensure
manufacturability and manufacturing cost control for its products. Garmin’s
development staff includes industrial designers, as well as software engineers,
electrical engineers, mechanical engineers and cartographic engineers. Garmin
believes the industrial design of its products has played an important role
in Garmin’s success. Once a development project is initiated and approved,
a multi-disciplinary team is created to design the product and transition it
into manufacturing.
Manufacturing and Operations
Garmin believes that one of its core competencies and strengths is its manufacturing
capability at its Sijhih, Jhongli and LinKou, Taiwan facilities, its Olathe,
Kansas facility, and its Salem, Oregon facility. Garmin believes that its vertically
integrated approach has provided it the following benefits with respect to all
products other than a few select marine products (VHF radios and AIS receivers),
and our accessory products, all of which are also manufactured by one or more
third parties.
Reduced time-to-market. Utilizing concurrent engineering techniques, Garmin’s
products are introduced to production at an early development stage and the
feedback provided by manufacturing is incorporated into the design before mass
production begins. In this manner, Garmin attempts to reduce the time required
to move a product from its design phase to mass production deliveries.
Design and process optimization. Garmin uses its manufacturing resources to
rapidly prototype design concepts, products and processes in order to achieve
higher efficiency, improved quality and yields, lower cost and better value
for customers. Garmin’s ability to fully explore product design and manufacturing
process concepts has enabled it to optimize its designs to minimize size and
weight in GPS devices that are functional, waterproof, and rugged.
Logistical agility. Operating our own manufacturing and distribution facilities
helps Garmin minimize problems, such as component shortages and long component
lead times which are common in the electronics industry. Many products can be
re-engineered to bypass component shortages or reduce cost and the new designs
can be delivered to market quickly. Garmin reacts rapidly to changes in market
demand by striving to maintain a safety stock of long-lead components and by
rescheduling components from one product line to another. Operating our own
manufacturing facilities also allows Garmin to quickly adjust the mix of product
production, helping to foster faster delivery response to the customer.
Garmin’s design, manufacturing, distribution, and servicing processes
in our US, Taiwan, and UK facilities are certified to ISO 9001, an international
quality standard developed by the International Organization for Standardization.
Garmin’s automotive operations in Taiwan and Olathe have also achieved
TS 16949 certification, a quality standard for automotive suppliers. In addition,
Garmin’s aviation operations have achieved certification to AS9100, the
quality standard for the aviation industry.
Garmin International, Inc., Garmin (Europe) Ltd and Garmin Corporation have
also achieved certification of their environmental management systems to the
ISO14001 standard. This certification recognizes that Garmin’s subsidiaries
have systems and processes in place to minimize or prevent harmful effects on
the environment and to strive continually to improve its environmental performance.
Competition
The market for navigation, communications and information products is highly
competitive. Garmin believes the principal competitive factors impacting the
market for its products are design, functionality, quality and reliability,
customer service, brand, price, time-to-market and availability. Garmin believes
that it generally competes favorably in each of these areas.
Garmin believes that its principal competitors for portable automotive products
are TomTom N.V. and MiTAC Digital Corporation (“MiTAC”) (which distributes
products under the brand names of Magellan, Mio, and Navman). Garmin believes
that its principal competitors for outdoor product lines are Magellan, a subsidiary
of MiTAC, Lowrance Electronics, Inc., a subsidiary of Navico (“Lowrance”)
and Delorme. Garmin believes that its principal competitors for fitness products
are Nike, Inc., Polar Electro Oy, Suunto Oy, Timex Corp., and Bryton Corp. For
marine chartplotter products, Garmin believes that its principal competitors
are Raymarine Inc. (“Raymarine”), Furuno Electronic Company (“Furuno”),
and Simrad and Lowrance (subsidiaries of Navico). For Garmin’s fishfinder/depth
sounder product lines, Garmin believes that its principal competitors are Lowrance,
Raymarine, the Humminbird division of Johnson Outdoors, Inc., and Furuno. For
Garmin’s general aviation product lines, Garmin considers its principal
competitors to be Honeywell, Inc., Avidyne Corporation, CMC Electronics,L-3
Avionics Systems, Rockwell Collins, Inc., Sagem Avionics, Inc., Universal Avionics
Systems Corporation, Chelton Flight Systems, Aspen Avionics, Dynon Avionics
and Free Flight Systems. For Garmin’s Family Radio Service and General
Mobile Radio Service product line, Garmin believes that its principal competitors
are Motorola Solutions, Inc., Cobra Electronics Corporation and Midland Radio
Corporation.