SIM Sales Expected to Rise

Schlumberger Smart Cards and Terminals says that after a year treading water, shipment rates of microprocessor cards surged back into double-digits with a 13% rise in 2002. Although the general economic climate impacted margins, there are still strong prospects: As a corollary of the increasing need for security we've been facing in the past couple of months, corporate badge and public sector ID cards projects have started to materialize significantly and could become significant volume markets -- joining the existing heavyweight mobile communications and banking segments. Such developments will support double-digit growth for at least the next two years, the company anticipates.

Subscriber churn, and major expansion in China, India and Latin America, all contributed to a return to steady growth for SIMs for mobile communications, the largest application sector for smart cards. After the shock of an 11% decline in 2001, shipments grew 13% in 2002.

Schlumberger believes there will be no return to the dramatic growth rates of the past in 2003. But it predicts growth rates for the number of units of approximately 7% this year, and well over 10% for the next two years, with annual shipments exceeding 500 million for the first time in 2004.

Within this overall picture are some significant developments and trends, including dominance for the JavaCard platform for high-end SIMs; the positive evolution from low- to high-end cards despite the slow start of third generation USIM (Universal Subscriber Identification Module) cards shipments due to the late 3G implementation; a significant breakthrough in CDMA markets with R-UIM (Roaming Universal Identity Module) cards; and a stronger than ever vision of the continuing need for SIM technology as the key to digital networks which are trusted by users and operators to provide security while protecting customers' privacy.

"As wireless technology begins to pervade communications at work, at home and on the move, the secure, portable and programmable attributes of smart card-based identification provide the vital component that will allow the technology to be used conveniently and effectively in all segments and across various wireless technologies. GSM and CDMA benefit from it today, Wi-Fi(TM) (Wireless Fidelity) wireless local area networks are starting to integrate its capability to provide seamless roaming and common billing with traditional wireless data and voice networks' and 3G is well equipped to take advantage of its superior convenience and flexibility. Through features such as authentication, billing, roaming and coordinating multi-protocol applications, we see SIMs as the essential operator-to-subscriber link for joined-up wireless experience," said Olivier Piou, president, Schlumberger Smart Cards and Terminals.

The 'write once, run anywhere' Java(TM) model is now truly established in the mobile communications arena. Thanks to their interoperability and the durability of applications ensured by upward compatibility, Java cards already account for virtually 100% of the high-end SIM market, and approach half of all SIM shipments. In 2003, Schlumberger expects Java cards to account for over half of all shipments for the first time, rising to two-thirds of the market in 2005.

Cost-cutting operators postponed new service launches and limited the shipments of 64K cards in 2001 and 2002. However, with operators' financial results improving, Schlumberger expects strong shipments of 64K cards in 2003, and reasonable volumes for new 128K cards.

Looking to the future, one bright spot is the large-scale adoption of the CDMA equivalent of the SIM, the R-UIM, in China. This could be of real significance for the CDMA market, as it has removed the fundamental barrier holding back progress -- the availability of handsets with an R-UIM card interface. Common services -- such as information on-demand and games -- which are accessible by both GSM and CDMA customers through advanced software platforms deployed within the operators' premises, further demonstrated the universality of the SIM/UIM identification technology, and significantly enhanced the return-on-investment of popular data services offered to subscribers in Asia.

Evolving 2.5 and 3G networks are key drivers for the future SIM market, and Schlumberger expects order volumes for individual USIM projects to run into millions during 2003 -- but starting in Europe and South East Asia first, rather than Japan. The intrinsic security features of SIMs are expected to be vital to provide rights management for many multi-media services.

The worldwide conversion from TDMA to GSM technology -- embracing Latin America, the USA and other areas -- is also gaining momentum, and provides a trend to be watched in 2003-2004.

Longer term, Schlumberger points to the rise of Public Wireless LAN (PWLAN) over Wi-Fi standards, now viewed by operators as a complement rather than threat to 2.5 and 3G services. The next one to two years will see 'SIM-style' developments for this application, perhaps on a separate smart card equipped with a USB interface, but managed by mobile operators. Other handset-implemented protocols, such as Bluetooth, present similar opportunities.

The technology inside high-end SIMs is set to improve rapidly over the medium term with larger memory arrays and significant upgrades to card and handset communications making USB a strong bet for this market sector.

Schlumberger -- the world's leading provider of microprocessor cards -- also cites the continued need for large R&D investments, the understanding of the complex security requirements for each card market, and building the right partnerships and distribution channels as key ingredients for the success of players."

Posted to the site on 18th April 2003