Asia Pacific SIM Outlook

Peering into Trends of SIM

Presented By

Anne-Corinne BellDirector Consulting and Business

DevelopmentFrost and Sullivan, Hong Kong

Prepared By

Jafizwaty Haji IshahakResearch Manager, Smart Cards, ICT

Practise Asia Pacific

2

Focus Points

•Global Smart Cards Overview

• Snapshot

• Percentage Split by Region

•Asia Pacific Market Dynamics

• Asia Pacific (APAC) Smart Card Overview

• SIM: Key Market Drivers & Restraints in APAC

• APAC SIM Market Size and Forecast

• Direction and Technology Trends

3

Global Smart Cards Overview: Snapshot

• In 2008 approximately over 4.6 billion smart cards were shipped worldwide

• By 2015- expected to grow to over 7 billion units with CAGR of 6.4 percent

• Decrease in Memory and an increase in MCU

• Applications such as SIM, Banking and payment, Government ID, Transportation are key contributors to the total global smart card revenue.

• Europe and parts of Asia have been the technological leaders in smart card application over the years. In both these regions, there are catalysts in various fields, pushing the boundaries of smart card usage year on year.

• France, Germany and UK are among the more progressive nations in Europe, with adoption in all key applications today.

• Asia Pacific houses the most progressive markets like Japan and South Korea and potential volumes from China and India. However at the same time, a large part of this region, in contrast, is extremely nascent, if not underdeveloped.

• Asia Pacific currently consumes over 49% of smart cards shipped globally.

• North America – contactless gaining healthy growth via payment application

• MCU cards gaining Momentum

4

Global Smart Cards Overview: Percentage Split by Region

Source: Frost & Sullivan

Percentage Split by Region (Units)

•LA

Latin

America

(LA) 4.3%

Europe Middle

East Africa

(EMEA) 39.4%

Asia Pacific

(APAC)

44.8%

Infancy Early Growth Late Growth MaturitySegment Life Cycle Stage

North

America

11.5%

Smart Cards Life Cycle by Region, 2007

Source: Frost & Sullivan

Percentage Split by Region (Units)

•LA

Latin

America

(LA) 9.5%

Europe Middle

East Africa

(EMEA) 35.7%

Asia Pacific

(APAC)

49.3%

Infancy Early Growth Late Growth MaturitySegment Life Cycle Stage

North

America

11.5%

North

America

5.4%

Smart Cards Life Cycle by Region, 2008

5

APAC Market Dynamics

High population.India = 1.1 billion

China = 1.3 billion

New technologyacceptance levels

highEg: Japan, Korea

Rising Income Levels.

Improvement in standards of living

Manufacturing Hub of the world.

Densely populated regions.

Majority of markets far from saturation

Minimal legacy systems in Tier 3

countries

Source: Frost & Sullivan

6

APAC Smart Cards Overview: Estimated Market Size

2006 Total Asia Pacific Smart Card Market

Others 34%

SIM60%

Mobile Communication

Government ID Mass Transit

APACKey Smart Card Applications

Corporate Security Banking/ Loyalty

Others

Source: Frost & Sullivan

2008 APAC total smart card shipments = over 2 billion units (to grow to over 3 billion by 2015 )

In 2008, SIM was still the key application with approximately 70% of total smart card volume in the region

2008 Total Asia Pacific Smart Card Market

SIM 70%

Others30%

Source: Frost & Sullivan

7

APAC SIM Market: Key Market Drivers

Increasing useIncreasing useOf Over The Air Of Over The Air (OTA) facilities(OTA) facilities

Moves to 64KMoves to 64KSIM drives SIM drives

MarketMarketForwardForward

SIM Based SIM Based Solutions Solutions

increase value of increase value of SIMSIM

Volume inVolume inIndia explodingIndia explodingAs China coolsAs China cools

offoff

Source: Frost & Sullivan

8

APAC SIM Market: Key Market Restraints

Convergence Convergence raises business raises business model issues & model issues &

push market push market forwardforward

Saturation in Saturation in major cities stuns major cities stuns

the marketthe market

Low end SIM Low end SIM slows down slows down

revenue growthrevenue growth

Source: Frost & Sullivan

9

SIM Market in APAC: Estimated Market size and forecast

Asia Pacific SIM: Unit Shipment

-

500

1,000

1,500

2,000

2,500

3,000

2008 2009 2010 2011 2012 2013 2014 2015

Year

Un

its

(Mil

lio

n)

• In 2008 approximately over 1.6 billion SIM cards were shipped in APAC

• With CAGR of 5-6 % in the next 6-7 years

• Contributes to growth of MCU card shipments

Source: Frost & Sullivan

10

Mobile subscription: Current State

Total number of mobile subscribers

Gro

wth

in

new

mo

bil

e s

ub

scri

ber

s

M’sia

South Korea

Philippines

ChinaIndia

Japan

Saturation

Volume growth in SIM

Opportunities: Differentiation in saturated market - increase revenues per user.

Source: Frost & Sullivan

11

Trends in SIM adoption

SIM Capacity & ASPs

16K32K 64K

128K

Above 128K

Contactless Mobile Transactions Continue to Rise Steadily

Maturity of mobile phone/services adoptionSource: Frost & Sullivan

12

New Developments : HDSC Making In-Roads

• HDSC is expected to be an important leap for SC

• Key Features/benefit of HDSC over a SC:-• Higher Memory/Card Storage• Better interface speed & processing• Improved Security• Candidate for Data Rights Management

High Density Smart Cards (HDSC)MomentousLeapFor Smart Cards

NascentStage

Price , Cheaper Options &Standards

LackBusinessCase

Source: Frost & Sullivan

13

New Developments: SIM Market-Opportunities

APAC SIM Market

Opportunities

Emerging Markets

Mature Sophisticated

markets

Volume Growth

Ripe for advanced capabilities such as

contactless SIM and NFC to take off

Cheaper lower end SIM cards

More expensive higher end

cards

APAC as a whole still holds vast opportunities for mobile operators and SIM vendors . It is a high growth market and the mobile communication market is still evolving in a way that presents exciting opportunities for vendors in the smart card scene.

Source: Frost & Sullivan

14

New Developments: Contactless Gaining Momentum

•Debit/Credit cards•Loyalty•Prepaid/Stored Value

• Micropayment

Contactless SC Technology

Key Applications

Mass Transit

Payment/Banking

Access Control

Government

Multi-Application• Driving License

• E-Passport• Welfare• National ID

• AFC• ETC• Public Parking

• Physical Access

• Logical Access

• Dual access

Source: Frost & Sullivan

15

New Developments: Integrated Smart cards with Other Auto ID- RFID

Similarities Similarities•Contactless interface

•Card and reader communicate via radio frequency

Applications

•Transportation application

•Physical access control application

RFID Contactless Smart Card

Source: Frost & Sullivan

Much wider frequency range from <135KHZ (low

frequency) to >2.45GHz

Much wider frequency range from <135KHZ (low

frequency) to >2.45GHz13.56Mhz Frequency only

13.56Mhz Frequency only

Single applicationSingle application

Multi-application (eg, same card can be used for e-

payment and door access).

Multi-application (eg, same card can be used for e-

payment and door access).

Much wider read range possible.Much wider read range possible.

Limits interaction between card and reader to 10cm

distance

Limits interaction between card and reader to 10cm

distance

Active or PassiveActive or Passive

Card not poweredCard not powered

Contactless interface onlyContactless interface only

Able to incorporate contact and contactless interface on

one chip (dual/combi)

Able to incorporate contact and contactless interface on

one chip (dual/combi)

RFID Contactless Smart Card

Source: Frost & Sullivan

Differences

16

New Developments: Various Single /Common Form Factors

STANDARDPLASTICCARDS

USB DEVICES

MOBILE NFC DEVICES

TOKENS

PASSPORTS

MINICARDS

HIGH POTENTIALHIGH POTENTIAL

STANDARD FORM

STANDARD FORM

NICHE MARKETNICHE MARKET

NOVELTYNOVELTY WRISTBANDS

& WATCHES

Source: Frost & Sullivan

17

New Developments: Various Single /Common Form Factors –Novelties (Contd.)

USED FOR

Commemorations

Marketing Gimmick

Market Exploration

(Trial Runs)

Sponsorship and Advertising

SUCH AS

Plush Toys

Accessories – Pendants, Necklaces and so forth

Watches & Wristbands

KeyChains, KeyFobs and so on

Source: Frost & Sullivan

18

New Developments: Mobile NFC

5

FAR EAST: MOBILE NFC

INFRASTRUCURE IMPLEMENTED

POTENTIAL COUNTRIES FOR

MOBILE NFC INFRASTRUCTURE

THE REST OF ASIA; YET TO ADAPT SUCH

TECHNOLOGY

Combination with existing technology

Taps into the mobile network

Consolidation of different services

Content & credit management

Source: Frost & Sullivan

19

APAC: Market and Technology Trends in APAC – NFC (Near Field Communication)

2006 & 07: trials, 2006 & 07: trials, acceptance acceptance

testing testing &standards &standards

settingsetting

Using Using Contactless SC Contactless SC

technology – technology – mobile devicesmobile devices

Convergence of Convergence of contactless SC contactless SC

apps on 1 apps on 1 platformplatform

APAC: South APAC: South Korea and Japan Korea and Japan leads way with leads way with

highest usage of highest usage of contactlesscontactless

Availability of Availability of handsetshandsets

Equitable Equitable business business

modelmodel

Interoperability Interoperability & standards& standards

Contactless Contactless smart card smart card

infrastructureinfrastructure

TSM and TSM and support support

service for service for multi-appsmulti-apps

Current StateFuture State: Mass Deployment

Outstanding key factors

Source: Frost & Sullivan

20

Asia Pacific Takes the lead in Smart Card Shipment

Key Applications –SIM, Government, Transport & Banking

Convergence of smart card applications on SIM - mass transit, payment, access control, etc –on various forms & integration with other auto-ID technologies

SIM Market Continues to Grow with Promises from Contactless & NFC

Telcos - Focus on more value added services that bring in higher revenue per user in more saturated markets.

Opportunities for mobile phones to serve the financial needs of un-banked population in developing countries through mobile transactions.

Pre

sent

Mar

ket

Con

ditio

ns

Fut

ure

Mar

ket

Con

ditio

ns

APAC: Direction & Technology Trends

Thank you

Questions & Answers

22

Highlights of 2009 GLOBAL Smart Card Research

Research Titles Type of Service

Draft Smart Card Market size MI

World Smart Card Market ME

World Smart Card SIM MI

World Smart Cards for Banking MI

World Smart Cards for Government MI

World Smart Cards for Transportation MI

World Smart Card IC Market ME

World Contactless Smart Card ME

World Readers & Chipsets ME

World M2M ME

World Corporate security (inc Smart USB) ME

World PayTV Market ME

World Smart Card Management Systems ME

NOTE:1- ME : Market Engineering2- MI: Market Insight

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Highlights of 2009 ASIA PACIFIC Smart Card Research

Research TitlesType of

Service

APAC Smart Card Outlook 2009 MI

APAC Smart Card Management System ME

APAC Smart Card Printers MI

Profiles of local Companies: Smart Card Value Chain ME

Smart Card Third Party Testing MI

Chip & PIN in Asia (banking/payment) MI

South Korea Smart cards Market ME

Near Field Communication MI

Asia Best practices/Cases for Contactless Convergence MI

Asia Pacific Smart Card IC on Different Form Factors ME

NOTE:1- ME : Market Engineering2- MI: Market Insight3- Analyst Briefing

24

Global : Smart Card Research Subscription- 2008

Highlights of GLOBAL Smart Card Research

Research Titles Type of ServiceGlobal Smart Card IC Study ME

Global Smart Card Study MEGlobal SIM Smart Card Study ME

Global Banking and Loyalty Smart Card Study MEGlobal Corporate Security (Logical and Physical Access Control) Smart Card Study ME

Global Government and ID Smart Card Study ME

Global Contactless Smart Card ME

Global Readers & Chip Sets Study ME

NOTE:1- ME : Market Engineering

25

Highlights of ASIA PACIFIC Smart Card Research

NOTE:1- ME : Market Engineering2- MI: Market Insight

Asia Pacific : Smart Card Research Subscription - 2008

Research Titles Type of ServiceIntegrated Smart Cards and Biometrics MEAPAC Smart Card Outlook: 2008 MIAPAC e-Passport MIMass Transit & Banking: Barries to convergence and multiapplication MISmart card:Untapped Markets in Asia MI

Emerging Applications in Selected APAC Countries MIAPAC Integrated SC IC Technology on different form factors MIVarious role of SIM MIAPAC Smart card management Systems MEAPAC e-Passport Market ME