Schlumberger Test & Transactions, a business segment
of Schlumberger, has issued its annual review of the smart card industry.
The report notes that the worldwide smart card industry came of age
in 2000, with open platform cards achieving mass volumes for the first
time. Despite substantial silicon shortages, shipments still grew 27%
to reach 1,790 million, confirming the pivotal role the smart card is
playing in providing portable, personal security across the spectrum
of end-user sectors.
Among the forecasts Schlumberger makes for 2001 is
continued double-digit growth in demand, driven largely by wireless
applications, with the emergence of mobile commerce adding a new dimension
to this segment. Also of note, the coming year will see the first volume
roll-outs of USB (Universal Serial Bus) compatible cards, and substantial
growth in the emerging US market.
Looking Back at 2000
Worldwide
For the first time, the most significant industry
event was not related to any development in card applications or technology,
but to a shortage of silicon. Booming demand for semiconductors led
to restricted allocations of silicon to manufacturers, and as many as
30% of chip orders may have gone unfulfilled. This situation led some
end-users to over order and build up inventory, partly explaining the
healthy shipment figures. This trend will probably continue until expected
increases in semiconductor capacity come on-stream at the end of 2001.
The star application sector for smart cards was, as
expected, SIM (subscriber identity module) cards for mobile phones,
which expanded by more than 70%. This surge was due to the strong demand
from consumers for mobile phones and û in the high-end of the market
— the intensive drive by operators to roll-out value-added services
based on SIM ToolKit (STK). The high-end segment of the market has effectively
standardized on Java* cards, and was the major contributor to an astonishing
year-on-year growth of 700% in open platform technology. Java cards
now accounts for some 15% of all shipments of microprocessor-based smart
cards.
"Java Card technology has had a radical impact on
the SIM card market, and more than two thirds of those operators deploying
STK services today actively prefer to base them on Java card SIMs,"
noted Xavier Chanay, Schlumberger vice president, Mobile Communication
Products. "The latest SIM card standards — which stabilized in
mid- 2000 — complete the chain to ensure that the process of creation
and deletion of STK applets is fully standardized."
Banking cards, the next largest market sector for
microprocessor smart cards, achieved healthy double-digit growth, although
not as high as in 1999. This slowdown occurred for a number of reasons:
The massive German GeldKarte rollout had passed its peak, some countries
extended their card life cycles by an extra year, and silicon was in
short supply.
Among other microprocessor card applications, pay
TV and ID cards grew strongly, with the continued rise of digital TV
and the emerging need for PC, intranet and Internet security. The specialist
application segment of health cards remained fairly static because of
its cyclical nature and reliance on large projects, of which the two
most pre-eminent — the French and the German projects — have
been more or less completed.
Payphone cards, the major application category for
memory chip-based cards, accounted for well over half of the industry's
total card shipments: Over a billion units in terms of volume, but only
one-sixth of the industry's revenue. This market remained stable, predictable
and very much a commodity market, now dominated by the two major suppliers.
North America
"In 2000, the U.S. saw the introduction of the first
major roll-out of smart cards in the financial sector with the Blue
card from American Express," said Paul Beverly, vice president, Smart
Cards, North America for Schlumberger. "Visa, MasterCard and their member
banks — such as Fleet Boston, First USA and Providian — followed
quickly with announcements about their own smart banking programs."
U.S. government agencies, such as the Department of
Defense and the US Postal Service, took early roles last year in defining
a variety of projects that use smart cards, including identification
cards for physical access to buildings and logical access to computer
networks. Strong interest also began to be shown in the U.S. in late
2000 for Java-powered smart cards for financial, information security
and mobile communications applications.
The Health Insurance Portability and Accountability
Act (HIPPA), which mandates that health care providers must develop
processes for secure electronic exchanges of confidential patient information,
has driven heated discussions about privacy and information security,
spurring increased interest in smart cards based technology.
Another important development in information security
this year was Sun's deployment of its Sun Ray* appliance architecture
for network access control. The new system allows users to access their
desktops anywhere within the network simply by inserting their smart
card into the computing device.
2001: Major New Opportunities
Worldwide
This coming year will witness double digit growth
of over 20% in overall smart card shipments, forecasts Schlumberger.
Mobile communications — which represents close to 70% of microprocessor-based
card shipments — remains the key focus for the larger players because
it is such a strong driver of both technology and revenue. In technology
terms, mobile communications has created the first mass market for interoperable
open platform cards, and customers continue to demand ever higher levels
of memory. The revenue derives from the high-end nature of the cards
— at least for those used to provide subscriber services —
and the additional services that accompany such sales in terms of STK
application programming and turnkey systems deployment.
Last year's growth in this segment is unlikely to
be repeated, as the market has matured, but there are still many bright
spots to look forward to in 2001.
For one, the SIM card concept should be exported to
non-GSM areas of the telecommunications world. Schlumberger expects
to see CDMA (Code Division Multiple Access) operators starting to implement
the benefits of the Removable UIM (User Identity Module) standard, which
will initially be used to facilitate roaming.
However, a more interesting trend is likely to start
as CDMA operators begin to adopt a more flexible approach to value-added
services offered by the portable identity module, in contrast to the
current firmware-based approach. This general shift might even migrate
into the North American TDMA (Time Division Multiple Access) market
where operators — who are increasingly becoming part of world-scale
alliances — may exploit the shift to 2.5G and 3G technologies to
adopt the flexible SIM concept.
The next major boost to the mobile communications
market is likely to come later in the year. The first introduction of
GPRS (General Packet Radio Service) high-speed digital networks will
provide the data communication speed to make WAP (Wireless Application
Protocol) a commercial success and create a demand for WIM (WAP Identity
Module) that will secure mobile commerce applications.
Schlumberger also expects to see the first trials
of 3G networks, again leading to fresh demand for SIMs in the shape
of the new Universal SIM device. With Japan involved in this market,
the latter half of the year could see the first high volume shipments
of mobile communications smart cards to that country. However, mass
volumes of USIMs are not anticipated until 2002.
The market for financial cards is expected to grow
strongly at around 25%, driven primarily by a number of national programs
to replace existing magnetic stripe bank cards with secure smart cards
built on the EMV (Europay MasterCard Visa) standard. Affected markets
this year include the UK with its current EMV replacement program; Mexico,
which is starting to see the first volumes of Proton cards; and Brazil
and China. Although most smart card programs are driven primarily by
the desire of banks to reduce fraud, the strong commercial success of
the American Express Blue smart card program in the U.S. and Canada
is viewed as likely to stimulate competition to release new chip-based
cards.
A high spot for the industry will occur this year
with the rapid rise of enterprise and IT security smart card applications,
which is expected to more than double. The growth is stimulated by the
general need for intranet and Internet network security, and the particular
support for smart card security tokens which is built into Windows**
2000. By 2003, Schlumberger estimates that nearly half of online transactions
will be secured by smart cards, creating continued growth rates of over
40% in this market.
Technologically, the major event for 2001 is likely
to be the widespread availability of USB-compatible smart cards, which
allow PCs and similar devices to interface with smart cards without
the cost of a conventional reader.
As regards open platform cards, Java card technology
has now reached true mass market maturity, while the other contenders,
MULTOS and Smart Cards for Windows**, remain in their infancy. Whether
these systems can catch up — particularly MULTOS, which has suffered
from its focus on banking cards — is questionable. Both MULTOS
and Smart Cards for Windows are looking to the mobile communications
market, and one critical test is almost certain to be the extent of
take-up there.
North America
One geographic region that stands out for 2001 is
the U.S. with its outlook for a significant increase in smart card sales.
Although the U.S. market has grown more slowly than the rest of the
world, this year has three major forces for change: the demand for IT
security, the stimulus to the bank card market to follow the American
Express Blue initiative, and the growing adoption of SIMs for TDMA and
CDMA platforms. Combined, these forces could result in sustained growth
rates of over 50% for the next three years.
Recently passed U.S. law now mandates that electronic
signatures are as legally binding as personal ones. Schlumberger sees
this as another key driver for increased demand for PKI-based smart
card applications, which secure the authenticity of electronic signatures.
The security provided by smart cards and the growing number of computer
hardware manufacturers integrating chip card readers as PC standards
may help drive growth of back-end e-commerce systems and networks that
accept smart cards as user identification for secure financial, retail
and corporate applications.
"We anticipate that this coming year will see the
announcement of substantial smart card-enabled network access projects
in North America," stated Beverly. "Mobile commerce is another potential
growth area, with the possibility of major retailers utilizing smart
card-enabled wireless technology to sell their products and services
to mobile phone users."
Reflecting the growth trend for smart cards in the
financial sectors, Schlumberger also anticipates a higher demand in
the US for smart card-ready point-of-sale (POS) terminals and wireless
devices for managing secure card transactions. The recent announcement
by AT&T, the third largest mobile network operator in the U.S., about
the addition of the GSM platform to its offering, is another factor
heralding increased growth for SIMs in North America.
"2001 could be a breakthrough year in the US market
for smart cards," said Olivier Piou, president, Schlumberger Smart Cards.
"With three major drivers stimulating change, we may at last see this
huge potential market begin to see significant activity.
World Smart Card Consumption and Forecast for 2000-2003
By Market (in millions)
The numbers below correspond respectively to 2000,
2001, Growth 2000-01, 2003
Payphone: 1080, 1190, 10%, 1410
Mobile communications: 350, 500, 43%, 800
Banking: 120, 150, 25%, 310
Healthcare: 65, 70, 8%, 110
Transport: 30, 45, 50%, 80
Others (IT, Pay TV...): 145, 215, 48%, 390
Totals: 1790, 2170, 21%, 3100
By Region (in millions)
The numbers below correspond respectively to 2000,
2001, share of total, 2003
Europe/Middle East/Africa: 890, 976, 45z5, 1240
Asia Pacific: 485, 652, 30%, 1024
Latin America: 350, 434, 20%, 620
North America: 65, 108, 5%, 216
Totals: 1790, 2170, n/a , 3100
By Technology (in millions)
The numbers below correspond respectively to 2000,
2001, share of total, 2003
Memory cards: 1250, 1432, 66%, 1840 ...of which have
contactless interfaces: 43, 72, 5%, 155
Microprocessor cards: 540, 738, 34%, 1260 ...of which
are multi-application cards: 80, 250, 34%, 600
Totals: 1790, 2170, n/a, 3100
*Java and Sun Ray are trademarks of Sun Microsystems.
**Windows and Smart Cards for Windows are trademarks
of Microsoft Corp.