They might have dominated Christmas wish lists for half a decade, but portable satellite navigation devices (PNDs) for the mass market might be about to join the endangered species list.

Smartphones with sophisticated navigation functions are storming the shelves with bigger screens, longer battery life, turn-by-turn voice prompts and consumers are lapping them up.

While sales of PND units are on the wane, the smartphone market has remained on a growth trajectory in spite of the choppy economic climate.

"A key reason for this is that the majority of the Australian market are on two-year contracts and with mobile penetration well over 100 per cent we can't see people abandoning their mobiles," said Mark Novosel, mobile analyst at market researcher IDC.

While he says economic factors might determine which contract a customer chooses, navigation is being increasingly rolled into lower cost phone plans.

"It wasn't really until the Nokia 6110 Navigator came along that GPS in converged mobile devices really took off. The primary driver for the success of the 6110 Navigator was that the maps and voice navigation software were included with the device, with nothing more to pay," he said.

While personal navigation market leaders such as TomTom and Garmin are unlikely to turn their backs on their core PND business in the near future, neither are they ignoring the smartphone revolution.

TomTom recently announced an app for the iPhone that will turn the popular smartphone into a fully featured car navigation device complete with maps, windscreen cradle, and turn-by-turn voice commands when it launches later this year.

Garmin has gone further with plans to release a smartphone in some markets this year. The Garmin Nuvifone has suffered delays amid speculation that it is struggling to compete with the slew of new smartphones on the market, however Garmin remains confident its phone will stand out.

"I think there is a place for an all-in-one phone designed by a manufacturer of a personal navigation device. It will be marketed as the navigation smartphone," said Matthew DeMoss, national sales and marketing manager of Garmin Australasia.

Novosel says that, because professional GPS software from the likes of TomTom could now be downloaded onto smartphones, many devices were able to provide similar functionality to a dedicated PND.

This has resulted in a flurry of innovations designed to keep PNDs ahead of the field, including lane guidance systems, rush-hour traffic and road speed information, text-to-speech capabilities for street names and 3D landmarks.

Kirk Mitchell, director of business development at mapping specialist Navteq said that a few years ago screen size, Bluetooth and MP3 functionality were killer features that people were prepared to pay for.

"Research proves that people are now finding value in creating a safer navigation environment," he says.

To satisfy this demand, the company is in the process of rolling out innovations such as a phonetic device called Navteq Voice to ensure the correct pronunciation of road names, helping to keep eyes on the road, and a feature that assists safe navigation of motorway lanes.

Matthew DeMoss, national sales and marketing manager at Garmin Australasia says the typical navigation application on a mobile is generally inferior to PNDs in terms of ease-of-use, screen size, voice directions and map display as well as having notably fewer features.

"I think that there is always going to be a customer who wants that all-in-one device - but there is also that customer that wants the very best device for that purpose. A lot of devices that have an MP3 player and camera as well as GPS functionality are a jack-of-all trades and master of none."

Novosel said another disadvantage was that many GPS-enabled smartphones still did not come bundled with GPS software of any sort.

"The GPS capability in these devices often remains unused as consumers can be unaware of its existence. In other cases, such as most Nokia devices, Nokia maps are provided to users at no cost. However, in order to activate navigation, including voice prompts, users must pay additional subscription fees."

Emile Baak, managing director at Nokia Australia said the company had sold 10 million GPS integrated smartphones, boasting "a very healthy activation rate".

He cites the convenience of carrying a single device and the opportunity for more "context aware" services that match a user's location with entertainment and service listings as key benefits of smartphone navigation products. But he concedes the platform is, for the time being, limited by size.

"The challenge is that we always have to fit all this technology into a very small package that should not consume too much energy," he said.

Novosel said that, in spite of their limitations, smartphones could take the place of PNDs for those who only need the device occasionally and don't mind smaller screen and keys, leaving PNDs with a niche market for those who do a lot of driving, such as couriers, taxi drivers and truckies.

"For many people, the convenience of an all-in-one device that can easily slip into the pocket is unbeatable, rather than having to hide their PND in the car or carry it with them when leaving their vehicle," he said.