London-based international marketing consulting company Frost & Sullivan says there is reason for smart card manufacturers to feel more optimistic, following a tough 2002.
In a forecast released this week, Frost & Sullivan says 2002 was a difficult year for smart card vendors, with fierce competition in the low-end SIM market dampening revenue growth.
However, the advent of 3G is likely to create brisk demand for high-end 32k and 64k SIM cards this year, says the group. At the same time, financial and identification applications are offering opportunities for smart card market expansion.
The report says that as telecom operators seek to provide value-added services to retain customers, demand for high-end SIM cards like 32k, 64k and even 128k are poised to rise. The roll-out of 3G is likely to generate a market for these high-end smart card integrated circuits capable of driving more applications.
In Western Europe, a renewal market is likely to be created with higher-end cards steadily replacing lower-end cards. Increased penetration of mobile telephony in countries such as India, Africa and Eastern Europe are also expected to provide opportunities for growth.
The SIM is critical to realising secure mobile transactions over GSM networks, says the forecast. At the same time, EMV (Europay/MasterCard/Visa)-compliant migration from magnetic stripe cards to smart cards within the financial sector is expected to provide greater opportunity to use these cards for mobile commerce.
Frost & Sullivan says Visa and MasterCard have initiated several low-cost smart card programs that offer a range of smart cards from single application payment cards to sophisticated multi-application Java-based cards of various memory sizes. GlobalPlatform multi-application cards are also being provided at economical prices. These programs have constructed a sound business case for financial organisations to start issuing smart banking cards.
The report notes that post 9/11, the number of government-sponsored ID projects worldwide has spiralled. Particular interest is being shown in the complementary use of smart cards and biometrics for secure identification. Contactless smart cards are being identified as among the best ways to store biometric data on travel documents such as passports, visas and identity cards.
In 2002, a total of 1 906.4 million smart cards were shipped globally, of which memory smart card unit shipments accounted for about 55.7% of the sales, with microcontroller cards making up the remainder. Frost & Sullivan forecasts a reversal of fortunes by 2006, with microcontroller smart card units capturing 55.5% of the total 2 541.3 million smart card shipments.
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