Smart Cards Get Smarter

by CXOtoday Staff    Jan 05, 2006

The smart card integrated circuit (IC) market received a strong boost in 2003 and 2004 with an explosive growth in the subscriber identity module (SIM) segment. The uptake of Europay, MasterCard, and Visa (EMV) cards is increasing and this is significant enough to drive continued growth in the overall market.

New analysis from Frost & Sullivan World Smart Card IC Markets reveals that revenues in this market totaled $2,098.9 million in 2004 and projects to reach $4,188.1 million in 2010.

Given that security concerns are increasing by the day for many countries, these applications will drive strong global growth over the next 10-15 years.

Industry Analyst of Frost & Sullivan, Ishahak notes that the major hurdle for global success in this space, which poses a significant barrier to large-scale projects, is privacy.
“Proposals to issue national ID cards in some countries are met with severe opposition from various civil liberties and privacy concern groups. Such projects require massive databases containing personal information on citizens, leading to concerns about their integrity and security,” he said.

“Getting public approval for such revolutionary initiatives is a great challenge for the government and calls for huge efforts on their part to protect personal privacy and data security by providing adequate safeguards against potential abuse and failures of the system,” added Ishahak.

Along with these challenges, the smart card IC market is facing changes in the value chain that threaten to spark off volatile relationships among participants. The traditional horizontal value chain of semiconductor vendors - smart card manufacturers - card issuers, is changing as some semiconductor manufacturers are directly approaching card issuers without consent of the smart card manufacturers, known as the ‘big four’.

While these changes bring increased opportunities for smaller participants, the larger ones need to monitor the potential threat. Underestimating the smaller participants is not a wise move, keeping in mind the dynamics of this evolving market.

Another analyst, Ubhey feels that relying on the big four customers is not likely to guarantee leadership in this market anymore. Instead companies will have to focus not only on beating the competition in terms of price, volume, and innovation, but also on identifying promising new customers.