Expecting boom, Motorola launches smartcard business unit

Seeking to tap what it believes will be a major new market, Motorola has announced a new business unit focusing on wireless smart cards. Motorola has long been a supplier of microprocessors to other smart-card manufacturers, who embed the Motorola chips onto their own cards, but now the company is repositioning itself to benefit from a forthcoming boom in the market.

Seeking to tap what it believes will be a major new market, Motorola has announced a new business unit focusing on wireless smart cards.

The new division, called Smartcard Systems Business (SSB), will produce smart cards as well as the devices necessary to read the cards, Motorola officials say.

Motorola has long been a supplier of microprocessors to other smart-card manufacturers, who embed the Motorola chips onto their own cards, according to Kevin Colosia, director of market and business development for SSB, the new division. But now the company is repositioning itself to benefit from a forthcoming boom in the market.

"We believe we are on the bow wave of demand for smart cards," Colosia says.

Analysts agree that jumping now into the market made sense.

"This is the time to do it," says Dan Amdur, an analyst with The Yankee Group in Boston.

Market researcher Dataquest. estimates that the overall market for microcontroller- and microprocessor-based smartcards will grow from 544 million units in 1995 to 3.4 billion units by 2001.

Smart cards first arose in Europe to offset conditions specific to that continent, including high telecommunications costs which made retailers reluctant to call a credit card company to get authorization for a purchase, as is standard in the U.S. and elsewhere. But now, conditions are ripe for smart cards to spread to the US and Asia, analysts say.

"There's all kinds of things happening in the U.S. to drive this market," says Jonathan Cassell, an analyst with Dataquest. For example, financial institutions are interested in using smart cards as identification for use with credit cards to prevent fraud, and some companies are looking at the technology for electronic cash, Cassell says.

Asia is poised for smart card growth as well, with Hong Kong already operating a transit system accessed by smart card, Cassell says. In fact, Dataquest predicts that Asia will have the fastest growth of any region. In 1995 only about 2 percent of worldwide sales of smart cards were in Asia, but by 2001 that figure will climb to 25 percent, Cassell said.

In essence, smart cards are a feature of a newly digital world. "The digital infrastructure is just popping into place in the 1990s," says Amdur of The Yankee Group.

From Motorola's standpoint, smart-card trials currently being held in the US bode well for the spread of smart cards beyond Europe, Colosia says. In the US there has been substantial trialing, including by transit authorities for passenger access to mass transportation, by universities for student identification to get into campus buildings, and by states exploring electronic drivers licenses, Colosia says.

Moreover, recent advances in smart-card technology, notably the emergence of wireless smart cards, auger well for Motorola, because of its long experience in radio frequency (RF) systems and software, Colosia said. Motorola has three major divisions involved in RF - cellular telephones, paging and two-way radio - and thus has substantial experience with wireless technology, Colosia says.

"We think it's a natural fit for us to be involved in the wireless portion of the smart card industry," Colosia says.

Dataquest's Cassell agreed. In 1995 Motorola was the number one vendor in chips for smart cards, a fact which when combined with their RF experience positions them well in this emerging market, he said.

"This is a great extension, a way to leverage their existing business as well as expand it in areas where they can really bring some expertise," Cassell says.

According to Colosia, Motorola will be shipping its smart cards and card readers by the end of the year.

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