Evolving Technologies Changing Dynamics of Smart Card Market

Transport, security applications will help push card shipments over 3 billion by 2008, Frost & Sullivan reports

Transport, security applications will help push card shipments over 3 billion by 2008, Frost & Sullivan reports

Palo Alto, CA — August 23, 2004 — Unit shipments in the total smart card industry totaled 2.02 billion cards in 2003 and are projected to reach 3.11 billion cards by 2008 as the cards find increasing acceptance across a range of application, according to new analysis from consultancy Frost & Sullivan.

Manufacturers have been highly encouraged by the growing number of innovations witnessed in the world smart card market, the consultancy reports in "World Smart Card Markets."

"A number of smart card segments seem to offer immense potential for growth," noted Frost & Sullivan Research Analyst Karthik Nagarajan. "Most notable of these is contactless technology, which has been fairly successful in applications such as banking, transport and security."

However, future expansion is likely to be threatened by the multiplicity of protocols, Frost & Sullivan believes. If contactless technology is to move forward, interoperability must be achieved, as in the case of contact cards where the standards are clearly defined at every level.

Europay, MasterCard and Visa (EMV) migration in many parts of Asia-Pacific (APAC), Latin America, Brazil and parts of Mexico is also expected to boost the uptake of smart cards. However, in North America, chip-based banking cards are only used as a "product differentiation" measure.

To make headway in these regions, banks and card associations are now trying to provide customers with alternative value additions. The absence of threatening fraud rates in North America has made it rather unnecessary for banks to opt for chip cards.

Security concerns, however, have been evident in the enterprise security market. With many companies in North America and Europe having identified smart cards as an ideal platform for the integration of physical and logical authentication, they have become increasingly popular.

"Even while the efficacy of these projects cannot be denied, the application and infrastructure costs are likely to prove prohibitive, especially for smaller enterprises," observed Nagarajan. "Unlike banking, security applications involve micro-controller cards with higher memory capacity and higher procurement costs."

Smart card adoption is also likely to receive a boost from the growing demand for government IDs, especially in APAC and North America. The drive includes national ID schemes, driving licenses and government employee ID and health cards.

The success of projects such as MyKad in Malaysia, SMARTICS in Hong Kong, Taiwan Health Card and the U.S. Department of Defense's Common Access Card project are likely to help in expanding the market. Further, developments like the South Korean government's decision to change all public official ID cards by 2005, promise high growth for this market in the future.

The growing popularity of high-end SIM cards is also likely to have a positive impact on the smart card market. Many vendors have expanded their product lines to include high-end cards, which has enabled them to move into newer telecom applications and counter the price decline.

"Higher end SIMs are also likely to receive a boost from the continuing migration of time division multiple access (TDMA) to global system for mobile communications (GSM)," said Nagarajan. "Growing competition among different operators is likely to make the accommodation of advanced data and voice services increasingly important."

The World Smart Card Markets report evaluates the uptake of smart cards in four major geographical markets: Europe, Middle East, and Africa (EMEA); North America; Latin America; and the Asia Pacific. It evaluates the performance of leading participants by unit shipments in two major smart card segments — memory and micro controller cards. Additionally, it provides profiles of regional industry participants, with an analysis of their revenue potential and identification of key opportunities for market penetration.