Asian card companies give MNCs a run for their money.
Taiwan's Goldkey Technology Corporation is the island's leading provider of SIM cards, the small smart cards that fit inside mobile phones and provide billing and customer information. But the 60-employee company knows that there are giants lurking on the horizon.
"Our major competitors are the multinationals (MNCs) that are the world's top producers of this type of technology," says Michael Chung, the company's senior director of sales and marketing. "They are the competitors of everyone in this business."
Goldkey works with a Taiwan chip manufacturer to provide the island's three top telecommunications firms with the cards. The company hopes eventually to expand its business into India and Southeast Asia.
"The market in Asia is growing so fast that there is still room for players other than the multinationals," says Chung. "Competing with the big players is not a major issue for us at the moment, but we're not so sure about two or three years down the road."
Smart cards, which often look similar to credit cards, contain an integrated circuit chip that allows the storage and processing of information. This can be anything from a simple pre-paid phone card to the Hong Kong subway's Octopus card. And the growth of the devices in Asia that Chung cited is well documented.
There are expected to be 2.17 billion smart cards used worldwide in 2001, according to Greg Pote, president of the Asia-Pacific Smart Card Association in Hong Kong. Of those, 976 million will be used in Europe, the Middle East and Africa, while 652 million units will be consumed in Asia and the Pacific.
Citing a report by the global smart card maker Schlumberger, Pote says that in 2003, worldwide consumption will rise to 3.1 billion units with 1.2 billion used in Europe, the Middle East and Africa, and 1 billion used in the Asia-Pacific.
The European, Middle Eastern and African markets are expected to grow 27%, while the Asia-Pacific market is forecast to nearly double that at 57%, he says.
"This clearly illustrates the potential for smart card manufacturers in the Asia-Pacific region and local companies have been quick to spot the business opportunities," Pote says. "While in most cases their technical capabilities are usually not yet up to the standards of the large European multinational smart card manufacturers, they are learning fast."
The European companies Gemplus and Schlumberger are the world's largest players in the global smart card industry. The companies Giesecke & Devrient, ORGA Kartensysteme, and Oberthur Card Systems are also major players worldwide.
"In Asia, smart cards are mainly provided by the big global suppliers in Europe, but it won't continue like this," says Jorgen Schmidt, president and CEO of Thailand-based DZ Cards.
Schmidt's company is a full-service plastic card manufacturer authorised by Visa and MasterCard to produce and personalise their cards. Its operations are focused on Thailand and Malaysia, where it maintains factories, and the Philippines and India, where it has representative offices. It produces more than 60 million cards a year.
The company produces GSM and SIM smart cards with memory and microprocessor chips from Siemens, Motorola, and Hitachi. And the entire process is done in its plants in Asia, from making the card to embedding the chip to printing and personalising it.
The company competes head on with MNCs in the regular credit card market, with exports to the United States, Europe and Australia. With smart cards, it is competitive in Asia, but it has yet to export its products outside the region.
"We are not yet exporting smart card technology back to Europe or the United States, but if someone in Europe wanted SIM cards from us, we could supply them," says Schmidt. "It will happen, I promise you. When the customers are ready for it, there will be a change, and there will be smart card products from Asia."
He notes that when Asian smart card companies are ready to compete with the MNCs, their smaller size could be an advantage. "It is like the mouse and the elephant," he said. "The advantage with the mouse is it can move very vast."
Another Asian company that is facing the MNCs in the smart card business is APLAB Ltd, a large and well-established electronics firm in India.
Set up in 1962, by Prabhu S Deodhar, the former chairman of the country's Electronics Commission, and adviser on electronics to former Indian Prime Minister Rajiv Gandhi, the company has prospered in a variety of fields.
In 1990, it began using chips from the multinational firms, SFS Thompson and Gemplus, to develop pay telephones in India that use smart cards. That spawned a variety of other smart card applications by the company in the past decade.
The company has developed bank cards that are more secure than conventional cards that use a magnetic strip, and it has produced stored-value or "electronic purse" cards for use in India. Its work led to the creation of a national standard for such cards in India that has been accepted for use by Reserve Bank of India.
Named as a smart card application pioneer in India at the International Conference on Smartcards in New Delhi in 1999, the company has patented many of its innovations. That includes an Electronic Pass Book that allows bank customers to withdraw or deposit money from branches that are not networked for online transactions.
"While we have invested considerable time and money in this venture, business is poor," says Deodhar.
"For one, India is too slow and all major application areas are controlled by the government, directly or indirectly. Multinationals can always muscle in since they have deep pockets and are armed with successes in Europe," he says. "The customers in this ex-British colony are still foreign-crazy and not enterprising enough to use local vendors."
The company now hopes to export some of its smart card applications outside of India by linking with companies in other countries that are just starting to develop such technology.
"We are ready to assist any international partners with our well-honed skills in embedded software and innovative solutions for use in other countries," Deodhar says.
Another Indian company that is partnering with a multinational to tap the smart card market is Shonkh Technologies. The company is the exclusive distributor in India of optical cards from the United States-based company Laser Card System Corp.
The cards use lasers to engrave information so that it can be added to, but not changed. They can store 4.1 megabytes of data, or about 1,200 pages of text. The company is marketing the cards for the storage of Medical, vehicle, insurance, banking and other information.
"Our focus lies in areas in which smart cards have not been used before," says Ravi Krishnamoorthi, the director of business development for the Bangalore-based company.
"We are not looking at typical smart card applications. We are looking at using them for land records, social security cards, and other areas."
Shonkh is looking to expand its operations to Singapore, London and Dubai. It will continue to focus on offering e-government smart card solutions, Krishnamoorthi says.
He adds that many Indian smart card companies are trying to partner with MNCs, rather than compete outright. But he said his company has little concern about being beaten by the big corporations.
"We compete on applications, not just on cards," he says. "We find a niche, and we find a requirement, and then we find a solution.
"We are developing a range of applications that nobody else has thought of."