SiRF Technology (SIRF), a San Jose, Calif.-based maker of GPS chips, this morning said it was cutting jobs and trying to restructure its business due to softening consumer demand. Already the worst performing tech stock for the year, shares of SiRF nosedived in early trading this morning.

“SiRF experienced greater-than-expected softness in product demand from its customers, especially in the PND, or Personal Navigation Devices market,” the company said in a press release.

SiRF is the canary in the GPS coal mine. In other words, the GPS device market has hit the skids and we should expect more bad news, and more dominoes to tumble. Why? Look at SiRF’s customers: Tom Tom, Magellan, NAVIGON, Sony and European white-label GPS maker, Binatone. If the macroeconomic trends are putting a damper on SiRF and its chip-buying posse, it isn’t hard to extrapolate and see trouble for Garmin as well.

Looking further out onto the horizon, I think the standalone GPS device market is going to get cannibalized by mobile phones, which are getting increasingly sophisticated when it comes to personal navigation functionality. GPS devices were among the hottest-selling consumer items this past holiday season, with sales up 214 percent and revenues up 488 percent, respectively, year-over-year.

Americans are buying global positioning systems (GPS) for their cars in large numbers, reports AdAge. The NPD Group says that revenues are up 214% and GPS unit sales up a whopping 488% over last year.

The M&A activity in the sector is on an upswing, and the primary driver being location-based and mapping services on the mobile phones, the latest being NXP Semiconductors’ $85 million buyout of GloNav.

As new network-enabled Dash devices and more mobile phones come to market in 2008, next 12 months will see an upswing in news and noise around location-based services. At least I think so. Any thoughts?