Schlumberger Test & Transactions, a business segment of Schlumberger Limited
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
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
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
The star application sector for smart cards was, as expected, SIM (subscriber
identity module) cards for mobile phones, which expanded by more than 70%.
surge was due to the strong demand from consumers for mobile phones and — 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(TM) 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
than two thirds of those operators deploying STK services today actively
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 GeldKarte roll-out 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
This market remained stable, predictable and very much a commodity market, now
dominated by the two major suppliers.
“In 2000, the US 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
Providian — followed quickly with announcements about their own smart banking
US government agencies — such as the Department of Defense and the US Postal
Service — took early roles last year in defining projects that use smart
for a variety of projects, including identification cards for physical access
to buildings and logical access to computer networks. Strong interest also
began to be shown in the US 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
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
Another important development in information security this year was Sun’s
deployment of its Sun Ray(TM) 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
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
used to provide subscriber services — and the additional services that
accompany such sales in terms of STK application programming and turnkey
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
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
Schlumberger also expects to see the first trials of 3G networks, again
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 US and
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(TM) 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
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(TM) — 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
communications market, and one critical test is almost certain to be the
of take-up there.
One geographic region that stands out for 2001 is the US, with its outlook for
a significant increase in smart card sales. Although the US 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 US 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 US, 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
About Schlumberger Test & Transactions
Schlumberger Test & Transactions provides consulting, integration and products
for testing and measurement of semiconductor devices, smart card-based
transactions, IP (Internet Protocol) network security and wireless services.
With 2000 revenue of $1.4 billion and over 8,000 employees in more than 40
countries, it is a business segment of Schlumberger Limited (NYSESLB), a
global technology services company with 2000 revenue of $9.6 billion. More
information is available at