According to the latest IHS Smart Card Overview Report, there’s a bright future for the smart card industry over the next five years, even though there are some specific regional challenges across certain vertical markets. The total number of smart card shipments is forecast to reach 12 billion units in 2020, with an expected installed base of 26 billion cards.
The SIM card market will continue to lead overall smart card shipments, but increasingly the electronic government (e-government) and payment and banking sectors will generate the most opportunities. The SIM cards dominance, in terms of shipments, will be eroded by big increases in shipments for e-government applications that will reach 1.1 billion cards in 2020, and payment, which is expected to grow by 850 million cards to 2.8 billion cards by 2020.
The migration to Europay, Mastercard and Visa (EMV) in the U.S., and growth in shipments in China, will spur growth in the payment market, while developments in India and Middle East and Africa will result in an expansion of e-government shipments. Shipments of SIM cards will remain healthy, but the drop in average selling prices (ASPs) in the Asia-Pacific (APAC) region has caused the entire market to become less profitable.
SIM card growth will focus on APAC, which is expected to continue to dominate both the installed base and shipment of smart cards over the forecast period. By 2020 APAC will make up approximately 56 percent of the total installed base and 59 percent of all shipments. Among all global regions, APAC boasts the largest population, which means that the region has a natural advantage in terms of total available market, and there is also a societal familiarity with smart card usage in the region. This familiarity will lead to increased penetration of smart cards.
The Americas will continue to underperform through 2020, when the region will receive only 15 percent of total cards shipped. It seems unlikely that this outlook will change over the forecast period, as many Latin American countries are still experiencing a period of economic difficulty.
Europe, the Middle East and Africa (EMEA) will retain its position as the second largest regional market for smart cards, in terms of installed base and shipments. With interesting developments in the African e-government market -- even with Europe going through a difficult period -- the region is still expected to play an important role.
By far the most exciting development in the market has been the rise of the smartphone as a master device. The transition of many applications from cards to smartphones will place pressure on the smart card industry, as the convenience of a single device will reduce the need for multiple smart cards. As consumers become even more comfortable using mobile applications, there could be a reduction in the total available market for smart cards. The immediate effect of the rising tide of mobile payments is that consumers now have another payment option at the point of sale or access; however, it is highly unlikely that there will be wholesale consumer rejection of smart cards. There is strong possibility that the development of systems that primarily use smartphones as the primary interaction device will occur in upgrade cycles after 2020.
Overall challenges lie ahead for the industry, as developments with the smartphone put pressure on traditional business models; but right now these challenges remain complementary. As projects become more complicated, and the payment function is combined with a transport function, or a payment function is part of a governmental function, the expertise of major card manufacturers, acting as system integrators, will become even more important in the development process. According to the IHS Smart Card Overview Report, the big four -- Oberthur, Morpho, Giesecke and Devrient, and Gemalto -- will still be in a commanding position in 2020, but some smaller companies might still struggle to find a place in the market.
Published by the IHS Digital Security Intelligence Service, the Smart Card Overview Report provides insight into the current smart card market and offers forecasts through 2020. The report examines the smart card market across APAC; EMEA; and the Americas.