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Smart Card Marketplace
Smart cards | Usage | Markets
Smart Cards
Smart cards will be the key to allow consumers' to connect between numerous
wired and wireless devices by providing user identification, authentication and
security, and enabling electronic transactions.
Smartcards are mobile billboards, engender loyalty and can be co-branded and are
able to provide a secure transaction platform - be it in the form of credit,
debit, or stored value (e-purse). Smartcard may incorporate Elliptic Curve
Cryptography (ECC) key pairs or any other security algorithm in a wireless
framework that can be deployed globally and by using the Funge dual slot mobile
phone accessory these features of a smartcard can be delivery wirelessly.
The smart card could carry a number of option features, a magnetic stripe, bar
code, biometric identification, and the like. Smartcards can also operate in a
contactless environment inside the Funge'TM' dual slot accessory enables
smartcard transactions to be delivered over wireless networks including
applications in the healthcare, transportation, and finance markets.
Smart Card Usage
Smart cards can be used to improve privacy, reduce fraud, increase profits, and
cut costs. The smart card market is growing at close to 50% a year and as many
as three to four billion smart cards will be issued in the year 2000 compared
with the eight hundred million issued in 1996. Although many people are already
using smart cards in some shape or form - the ubiquitous phone card, the Mondex
cash card, certain customer loyalty cards, and mobile phones - most have no idea
what a smart card actually is and how the "plastic card containing a silicon
chip" will change their lives.
In addition to the use of smart cards in the financial sector to reduce fraud
and increase security, there are a number of other areas in which smart card
usage will increase profits, and reduce costs, including: national ID,
passports, mobile telecommunications, home entertainment, public telephones,
public transport, utilities, leisure, government benefits, road tolls, local
government, health care, education, employee cards, military applications,
customer loyalty and fleet administration.
One possible financial development is a variation on the electronic purse in
which the smart wallet with a built-in modem interface acting as the 'ATM in
your pocket' will enable the bank to download funds to the wallet holder's
stored value smart card.
A mobile phone (which already contains a smart card, storing personal
information and increasing security) might also be used as a portable smart card
terminal and there are (3) three items that are currently taking top priority
with manufacturers of smart cards:
1. Linking smart cards with PC technology, which will enable smart cards
to have far wider applications.
2. Finding a common operating system (such as Java or Multos) meaning
that cards can be both multi-functional and usable on different
operating systems.
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3. Developing cards with crypto-processors to offer public key
encryption, to meet demands for the highest levels of security for
payments via the Internet or PC.
Smart Card Worldwide Market Update
The relentless advance of the smart cards market continues: growth in 1998 was
at 33 percent and expected growth in 1999 is at 29 percent. Outside of the
memory phone card volumes, the real market jewel was still the digital wireless
telecommunications (GSM) application, which accounted for over 38 percent of
worldwide revenues.
So what really changed in the last year? Largely it was a sense in the market
that if we were not really out of the market canyon funk yet, we as an industry
were dealing with it head on. Gemplus, Schlumberger, and Gieseke & Devrient
largely finished their reorganizations -- with the last bit of the reorg being
Daniel LeGal, former head of Gemplus, leaving under mutual agreement. Oberthur
bought spicy De La Rue, and in one swift move reinvigorated itself for future
competition. Despite these moves, the money still would belong to software with
card prices still steep in decline, even in the beloved GSM vertical market.
In the chip markets, Siemens became Infineon and still led the market in market
share, though ST Micro still overwhelmed with its sale of microcontrollers.
Atmel showed its muscles by acquiring the former Motorola smart card chip
division in addition to being one of the two qualified silicon platforms for the
Windows OS. Philips Semiconductors still pushed on as customers embraced the XA
crypto machine in key markets such as pay TV and banking. Lastly, the industry
welcomed the first real 32-bit core courtesy of NEC, who showed silicon at
Cartes and is expected to go to mass production in Q1 2000. Other 32-bit cores
are estimated to be available by Q3 2000.
Worldwide Smart Cards Market
[GRAPH]
On the software side, we saw Java begin to dig its nails into the GSM market as
Java SIM cards exploded onto the market with approximately over 10 million sold
into Europe. Was Windows doomed? Hardly so - this event was but the first jab,
and Microsoft itself no doubt has some tricks up its sleeves, such as already at
least 30 trials and projects in Europe and North America using Windows for Smart
Cards (and yes, the name is really Windows for Smart Cards and not Smart Cards
for Windows, as initially proposed). Then of course MultOS continued its own
attack on the market: not only was American Express using MultOS in its first
Blue cards, but also several key Japanese banks in their own trials.
Words of wisdom then as we go into the year 2000: watch the government market in
the United States and the great debut of network access and security smart card
markets in that country. Give an eye out to wily ISV and DSC boutiques worldwide
like Platform
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Seven, Cardsoft, and JSource (and also to ACG, a different sort of animal unto
itself). Finally, the best of luck to the card vendors who seek to continue
their transformation to being software-directed houses.
By Alyxia T. Do, Principle Analyst, Frost & Sullivan
Smart Cards - Asia Pacific Region
The Asian Pacific smart cards market remains vibrant and kicking and what is
impressive about the region is not only the number of cards sold which is
estimated to have been 150 million in 1998, but the market share the region
holds in terms of revenue contribution to the global smart card market.
Indeed, the Asia Pacific generated over 17 percent of the worldwide revenues for
the smart cards market, coming in second after Europe with 70 percent and
beating out Latin America with 7 percent market share. Frost & Sullivan
estimates that by 2004, the region will command at least a quarter of the
revenue market shares worldwide, with China by itself commanding nearly a third
of market.
The World Smart Card Market: Regional Market Shares by Revenue
1998 - Frost & Sullivan
Region Market Share (%)
------ ----------------
Latin America 7.0
North America 6.1
Asia Pacific 17.9
Europe 67.1
Source: Frost & Sullivan Research
Digital Cellular Phones, Government Programs, and Network Security
Driving Applications
A quick look at the breakdown of the smart cards market by application in the
region also reveals a great diversity of programs and projects. Though phone
cards still dominate in terms of units with 50 percent market share, subscriber
identification applications (e.g. GSM handsets, pay TV set-top boxes) take the
purse with over 66 percent revenue market share in regional card sales.
Indeed, the GSM segment has been the honey in the card manufacturer's revenue
pot since the early 1990s, and this segment will continue to grow even sweeter.
Up until this point, digital cellular SIM card sales have been principally
dependent on the growth of the GSM market within Asia Pacific, but in the future
SIM cards will find their way dual-frequency phones if the UMTS initiative has
anything to do with it. What this means is that smart cards will ride the
explosion not only of GSM handset technologies, but also of the CDMA handset
technologies. Having a SIM card serve CDMA is a key success factor when
considering that cellular phone powerhouses such as Japan and Korea have or are
moving towards the CDMA standard.
To give an idea of what type of market potential smart cards are looking at,
Frost & Sullivan Telecommunications research shows a combined CDMA and GSM
handset market forecast of over 200 million handsets to be sold in 2002.
Another vertical market of immense interest for the region is the institutional
card market, which encompasses card issuance for government, university, and
health identification. Despite a hard hit in its economy, Malaysia pleasantly
surprises with its continued efforts
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in the Multimedia Super Corridor project with the intended issuance of a
citizen's multiapplication card. Taiwan and Singapore are also key governments
pushing nation-wide smart cards. In the university setting, programs such as the
University of Hong Kong show technical innovation as students are using their
multi-functional combi-cards to do everything from withdraw cash to access
campus buildings. And for health identification, the latest project is that of
Thailand's SynergyNet which aims to make convert its magnetic stripe medical
card network into a smart card one, resulting in a potential market of 5 million
cards to be issued in 2002. Given this high level of activity in the
institutional smart card markets for Asia, then, it is not a surprise that Frost
& Sullivan expects this vertical market to hold 30 percent revenue market share
in the region in 2004.
The Vertical Markets in the Asian Pacific Smart Card Market: Application
Market Shares by Revenue, 1998 & 2004 - Frost & Sullivan
1998 2004
Vertical Market (%) (%)
- --------------- --- ---
Financial 11 15
Phone Cards 9 13
Subscriber Management (GSM, Pay TV) 66 26
Institutional (Govt, Health, University) 7 30
Network security 1 8
Transportation 7 7
Other 1 1
Finally, though a major thrust of the network authentication market will belong
to North America and Europe, the Asian Pacific network security markets
nevertheless are likely to do well. From being a market with less than 1 percent
unit market share regionally, this vertical market is foreseen to achieve nearly
10 percent unit market share in the next 5 years. Though other two-way
authentication hardware methods such as USB tokens are likely to provide stiff
competition, smart cards are seen to be the dominant hardware token market for
the Asia Pacific. The key target customers in this arena will be the plethora of
large electronics and information technology firms located throughout the
region. These corporations will not only want to increase security levels in the
face of increasing global electronic terrorism and espionage, but also use the
smart card in order to take advantage of electronic business-to-business
commerce based on intricate and complex intranet, extranet, and Internet models.
As a result, the smart card used for network authentication today will tomorrow
be a dynamic multi-functional card carrying the necessary programs to enable
company workers to engage in on-site secured e-commerce.