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An ISA – FEEDBACK DocumentISA Confidential 2009 1An ISA – FEEDBACK Document
An ISA – FEEDBACK DocumentISA Confidential 2009 2
Objective and methodology of the document
• The ISA (Indian Semiconductor Association) has proposed a study to understand the smart card industry scenario in India from a semiconductor industry perspective
• The key objectives of the study include• Understanding the overall dynamics of the smart card industry• Current status of the Indian smart card industry• Key usage trends and application areas of smart cards• Global smart card industry practices• Smart card industry practices in India• Drivers for growth, new segments, emerging application areas, changes in
technology• Impact of smart cards on the semiconductor industry
• Around 25+ expert interviews across key stakeholders, including chip suppliers, card manufacturers, RFID suppliers, system integrators, issuing authority, planning commission, smart card association
• Desk research focusing on global and Indian market trends, existing and emerging applications, technology focus, new initiatives, e-governance projects
• Analysis based on primary interviews and desk research
Objective
Methodology
An ISA – FEEDBACK DocumentISA Confidential 2009 3
Smart cards and RFID tags – A brief ideology
• In the Indian context,• Contact based smart cards and RFID tags currently have moderate penetration, while
contactless cards are yet to see a significant application base• However in select cases, the smarts cards are built only with memory devices and the
reader re-programs the card when connected
Smart cards are plastic cards embedded with a microprocessor or memory chip
Contact based smart cardsContactless based smart
cardsRFID Tags
Identification and process based application
Identification based application
An ISA – FEEDBACK DocumentISA Confidential 2009 4
Smart card applications in India are currently nascent but have immense potential in the years to come
• A smart card is a combination of electronic modules embedded in a plastic card to
perform simple access applications to more complex applications, like monetary
computation and identity status. The core function of a smart card is to store and process
data based on the application it is programmed for
• The Indian smart card industry is characterized by popular applications like SIM cards,
access cards, vehicle registration, tolling, ticketing, loyalty cards, pay TV cards, financial
and health cards
• These cards are contact based or contactless, which can be either upgraded or can
function as use and throw cards
• RFID, a relatively new technology, is gaining popularity in some areas
• RFID tags are used for product tracking and identification application. Some of the
popular applications include vehicle tracking, retail goods tracking, LGP cylinder tracking,
library management, auto component tracking
An ISA – FEEDBACK DocumentISA Confidential 2009 5
Indian Telecom is the most successful application market for contact based smart cards
Success rate of smart card implementation – Global vs India scenario
Segment An India overview
Telecom India is one of the fast growing economies for high tele-density. Now CDMA phones also use SIM cards. As of end-August 2009, the subscriber base stood at 495 mn. Growth rate of subscriber base is at 15%
Transport Only select public transport in metros have implemented smart cards. Eg. Go Mumbai cards for rail and bus transport
Entertainment Availability of spectrum license for satellite television and conditional access has evolved the pay TV market in India. By the end of 2008, the subscriber base stood at 9 mn. Growth rate of subscriber base is at 30%
BFSI Select banks have introduced Chip and PIN cards, (EMV) which promise high security
Health care Largely a Government initiative to provide medical services to families below the poverty line
Retail Tagging of retail goods
Government Driving license, MNIC cards, e-passports are amongst select initiatives taken by Government
Education Select institutions have started issuing access cards to students
Hotel Predominantly access cards
Others Largely tagging application India Global best scenarioSource: ISA – Feedback Study, 2009
An ISA – FEEDBACK DocumentISA Confidential 2009 6
Status of applications for smart cards and RFID tags in the Indian market
Usage
Segment
Health & Pharma
Retail
Government
Education
Hotel
Others
Under evaluation
Nascent PilotAlready
prevalentDiscontinued
Banking
Entertainment
Transport
Telecom
• Majority of the pilot projects have been tested for RFID tagging• Ticketing, Toll collection and e–passports are the only applications tested for contactless smart cards
Access Control
SIM cardsNFC – Near Feed Communication
Access control & Attendance
Vehicle tracking & parking solutionsTicketing and toll
Pay TV cards
Access control & Attendance
Asset tracking Credit cards
Access Control
Asset Tracking
Raw material & goods tracking
Library management Attendance
Access control, Loyalty cards
Electronic passports
Toll receiptsIdentity cards
Defense plane tracking
Personnel & Ammunitions tracking, LGP cylinder, laptop tracking
MNIC cards Driving licenseVehicle Registration
Source: ISA – Feedback Study, 2009
An ISA – FEEDBACK DocumentISA Confidential 2009 7
Bulk of the applications are supported by contact based cards
Segment Applications in India Global applications
Telecom SIM cards SIM cards
Transport Registration License Tolling and ticketing
Vehicle tracking
Registration
License cards
Tolling E-ticketing
Vehicle tracking
Entertainment
PAY TV cards
PAY TV cards
Banking and Finance
Credit card Debit card Credit card Debit card
Healthcare Patient card Insurance Patient card
Insurance
Retail Cash transaction
Loyalty cards SKU tracking
Cash transaction
Loyalty cards
Discount cards
SKU tracking
Government License National ID Security cards
License National ID Security Cards
Passport
Education Campus cards
Library cards Library management
Campus cards
Library cards
Library management
Hotel Hotel cards Hotel cards Frequency cards
Discount cards
Key Cards
Employee access
Others LPG tracking Inventory management
Animal tagging
Animal tagging
Inventory management
Segment arrangement is based on popularity of usagePredominantly contact based Predominantly contactless RFID taggingSource: ISA – Feedback Study, 2009
An ISA – FEEDBACK DocumentISA Confidential 2009 8
India is now moving towards contactless cards; however RFID yet to gain popularity
• Shift from the simple application of identification, to more complex applications, like data
processing from smart cards
• Technology orientation and scope to integrate futuristic applications, have led to the usage
of 16 bit processors
• Need for an all in one card - national acceptance for multiple applications
Processing type
System (excludes SIM cards)
Type
Application
8 bit card
Contact based
Memory card
Access control
Historic Current Future
Majority 8 bit, but 16 bit finding
acceptance
Around 80% contact based, 20%
contactless
Select cards are memory based,
while others are microcontroller
based
Access control, identification,
driving, tolling, license
16 bit & 32 bit to find
maximum applications
Majority of cards being
contactless
Only microcontroller based
cards
Integrated application cards,
likely to be the key
Indian Smart Card Industry Evolution
Source: ISA – Feedback Study, 2009
An ISA – FEEDBACK DocumentISA Confidential 2009 9
Government initiatives – potential applications specific to India for smart cards
Projects Description Number of people enrolled with the scheme
Possibility of a smart card conversion and activeness of the project
RSBY Rashtriya Swastya Bima Yojana – Health insurance service for families below poverty line
• 6.2 mn families enrolled till date and have been issued a smart card
• Highly active project for issuance of smart cards
• Target of 15 mn families in FY’ 10
NREGA National Rural Employment Guarantee Act – Employment to the rural poor for a minimum 100 days in a year
• Employment provided to 100 mn households till date
• Highly active project for issuance of biometric based smart cards
• Target of 10 – 15 mn in FY’ 10
Voter ID Photo identification card issued to people to authenticate identity for voting
• 586 mn voter ID cards in India
• Unlikely to convert into smart cards
Ration card Identity document for public distribution system classified using the monthly household income of a family
• 222 mn families with ration cards in India
• Kerala government plans to issue smart card based ration cards
PAN card Permanent Account Number for Income tax
• 84 mn PAN cards issued
• Unlikely to convert into smart cards
An ISA – FEEDBACK DocumentISA Confidential 2009 10
Chip suppliers and card manufacturers are technology drivers, while market is driven by governing bodies
• Manufacturers of smart cards
• Integrate SOC with the plastic cards
• Design the system based on the key objectives of usage
• Integrate technology with infrastructure for optimum usage and maximized operations
• Policy makers• Regulatory authority
– set out guidelines for all needs of card users from design, integration to supply
• Key entity to roll out national level projects
• Third party evaluators to verify the sanity of the system
• Technology standardization• NIC, CRIS
• End users have limited influence in driving the need for smart cards
• Majority of the smart cards and components are imported; Chip sets, SIM cards, readers, etc.
An ISA – FEEDBACK DocumentISA Confidential 2009 11
Market dynamics of smart cards have time and again posed operational challenges for stakeholders in the Indian market Chip suppliers Hitachi Infineon MosChip NXP ST Micro
Reader suppliers CMS Data Net Systems
Ltd. Gemalto M -Tech
Reader suppliers CMS Data Net Systems
Ltd. Gemalto M -Tech
Card suppliers Bartronics ERG Gemalto IRIS Kedia M -Tech Orga Siepmanns VCT
System integrators
AFTEK
CMS
EFFKON
Explore Infotech
iSmart International
M -Tech
Score Infotech
SISL
Smart Chip
Wipro
Xident
System integrators
AFTEK
CMS
EFFKON
Explore Infotech
iSmart International
M -Tech
Score Infotech
SISL
Smart Chip
Wipro
Xident
Active consortiums CEPS NIC (National Informatics
Centre) SCAFI (Smart Card Forum of
India) SMARS (Smart Rupee System) Zero Mass
Active consortiums CEPS NIC (National Informatics
Centre) SCAFI (Smart Card Forum of
India) SMARS (Smart Rupee System) Zero Mass
Promote smart card based transactions in payment and identification areas
Refer standards and specifications
User segments: Government Sector Telecom Non – Telecom
User segments: Government Sector Telecom Non – Telecom
Note: This is only an indicative list, established through market interaction. The listing is done on alphabetical order
• Industry evolution started with chip suppliers followed by consortiums, system integrators, card and reader suppliers
An ISA – FEEDBACK DocumentISA Confidential 2009 12
Regulations and policy framework need to be strengthened to advocate higher issuance of smart cards across segments
• Need to ensure conformance to standards and guidelines • Policy framework should warrant that all the applications and software is developed/
tested by the department of IT (NIC), specially for government projects• Promote collaborative working across departments various systems • Build a wider network of semiconductor companies for authorising and certifying smart
cards for the varied applications
• Ensure faster implementation of projects• Build capabilities for implementation of large scale projects – addressing mass market
volumes for smart card application• Synchronizing cards usage across multiple applications – integrating geographic usage to
common user pool
Issues to be addressed
Focus areas
An ISA – FEEDBACK DocumentISA Confidential 2009 13
Indian smart card industry estimated at USD 130 mn for FY’ 09 where cards account for 64%
2008 - 09
Value: INR 6,500 mn (USD 130 mn)
Smart cards64%
Infrastructure + software
25%
Services11%
Of the 140 mn contact based cards, SIM cards account for125 mn Chip sets account for 40 – 50% of the total project cost, while the balance is made up by
card, OS and integration costs Smart cards chips are primarily imported from China, Taiwan, United States and European
Union Penetration of smart cards has been driven by the acceptance of Governing bodies or nodal
agencies, despite higher cost of cards
Market estimates for smart cards and RFID tagsOverall size of the smart card industry
Conversion norm: USD 1 = INR 50
Value: USD 84 mn Volume: 158 mn
Source: ISA – Feedback Study, 2009
An ISA – FEEDBACK DocumentISA Confidential 2009 14
Contact based cards form bulk of the smart cards business in India
• Contactless is a superior technology, but is yet to find strong foothold, due to cost economics; is likely to gain prominence in the coming years
• New technology phones like Nokia 6212C with NFC driver, capable of acting as smart cards and also as reader terminal (NFC project implemented in Bangalore on a pilot basis)
Smart cards –18 mn cards (excludes SIM cards) RFID Tags – 15 mn tags
Source: ISA – Feedback Study, 2009
An ISA – FEEDBACK DocumentISA Confidential 2009 15
Contactless cards are likely to become more popular in future due to competitive costing and longer life of cards
• Smart cards are typically of the following sizes• 2.5 cm x 1.5 cm (SIM cards)• 8.5 cm x 5.5 cm (Others)
• Contactless cards gaining popularity over contact based cards – The ratio likely to change to 50% share for contactless, from the present 20% for non-SIM card applications
• Life of contactless is higher (8 – 10 years) than contact based (3 – 4 years)• RFID tags with a reading range of 5 – 10 cm are the most common; strong challenge
against barcode labels valued at 20 paise per label• Minimal changes in infrastructure for contact based solution and contactless solution;
variation in cost of solution is primarily driven by cost of card
INR per card
Source: ISA – Feedback Study, 2009
An ISA – FEEDBACK DocumentISA Confidential 2009 16
Large scale project implementation and technology upgradation amongst key challenges
Technology
Regulation
Awareness
Integration
• Build allied infrastructure (like reader terminals) and improve its penetration across cities
• Work towards educating customers on the extent of application of smart cards across user segments and governing bodies
• Streamline procedures in Government funded projects (approvals, standardization)
• Database generation, integration into one system and authentication - major challenge for UID project
• Integration of existing non smart card users to smart card user pool for existing applications (e.g: e-passports: existing book form passport holders to convert to e-passport)
Cost • Increasing cost pressures from substitute products like magnetic
cards (for smart cards) and bar code readers (for RFID tags)
KEY
CHALLENGES
An ISA – FEEDBACK DocumentISA Confidential 2009 17
Government projects likely to be the key growth driver for smart cards in India
• Government schemes like
NRGEA, RSBY, ESIC and e–
Governance projects
• Government participation and
strong policy framework
• Growth in telecom subscriber
base – key driver for contact
based smart cards (SIM cards)
• Increasing awareness on
applications of smart cards and
reduced prices, likely to see
greater acceptance of smart
cards in private organizations
• Technology integration and
multiple applications of smart
cards, expected to drive
growth
• Government – • Employee's Provident Fund to issue smart cards for its
26 mn subscribers• Smart Cards for Government employees & laborers in
Goa• The Kerala government to issue smart card based
ration cards• 6 mn cards under RSBY scheme; 10 mn ESIC cards
• Banking and Financial Sector –• ICICI Bank: Smart cards for facilitating transactions,
payments to utilities and services etc.• Reserve Bank of India (RBI): SMARS (Smart Rupee)
project Mumbai Campus Scheme for 150 merchants
• Transport – • Driving license : Gujarat State & Delhi Traffic Police.• Ticketing: Metro railway, Kolkata & (BEST) Mumbai
• Loyalty card – • Promoted by BPCL, HPCL, Snowhite, Homesaaz
• Library Management – • Used for stock taking, to determine the location of the
books at DFRL Mysore, Kerala State Central Library
An ISA – FEEDBACK DocumentISA Confidential 2009 18
UID program will be issuing an unique identification number alone and will not necessarily influence the usage of smart cards
• Need for UID number is primarily governed by security requirements of the Indian economy and access to opportunity for the poor, which is identity governed
• Around USD 20 mn planned under UID project for FY’ 10. The authorities will work in close coordination with Home Ministry’s National Population register through the Registrar General of the census, in accordance with the Indian Citizen Act
• National Rural Employment Guarantee Act, Sarva Shiksha Abhiyan, National Rural Health Mission, Bharat Nirma are government schemes covered under UID
• Karnataka has been chosen as the pilot state to implement the project; potential of around 50 mn
• Phase 1, which is database collection, is estimated to complete in around 2 years
• Authenticity and safeguard of information through government nominated data collection centers
• First set of UID numbers expected to be rolled out by 2010-11
• Biometric information like fingerprint and photograph to be used for identification and authentication of a particular UID number
IdentityPE, ESI, Pension
Bank account
Police complaints
Property transaction
Employment schemes
VotingInstitutional admissions
Tax
Driving license
Telemedicine
Passport
Unique Identificati
on number to
every resident of
India
UID can be used for applications which demand background checks
An ISA – FEEDBACK DocumentISA Confidential 2009 19
UID can be a backbone to drive high potential for smart cards
• Scope to feed the UID number onto a smart card• Ease of carrying the card and use in applications which require UID number• Individuals do not have to remember 16 digit UID number
• Large number of issuing authorities like Banks, Insurance companies, Mobile phone operators, Schools, Government bodies, Corporate firms can incorporate the UID number in the smart cards for their respective users• Easier and faster background checks• Since UID will be accepted nationwide, the migrating population will be hooked onto
the existing services • Eliminates the possibility of re-allotment based on location
• Scope to converge multiple applications onto the UID based smart cards to make the system future proof• Passports• Vehicle registration and Driving license• Ration cards• Banking and insurance, etc
• Likelihood of an all in one card in the years to come
An ISA – FEEDBACK DocumentISA Confidential 2009 20
India offers a huge potential for smart cards with e–governance applications leading from the front
Pointers defining potential
for smart cards
e-passport
Banking
Health
Transport and Ticketing
RFID Tags
• Increase in immigrant population mix of students and working professionals seeking overseas opportunity; around 8 - 10 mn passports issued every year
• Initiative to provide free health check up and treatment for the rural population has given rise to the need for health cards; an estimated 800,000 is the rural population of India
• ESIC – provides health services card to 40 mn people at government subsidized rates
• Government focus on metro rail projects across major cities like Delhi, Mumbai, Bangalore, Chennai, Hyderabad; scope for integration by using common card across public transport
• Huge potential, replacing existing magnetic cards with smart cards; smart cards offer scope for multiple applications using a single card
• Growth in the retail sector and need for tracking the goods helps in efficient stocking
• Growth in segments like transport (vehicle tracking), logistics (container tracking); fuelling demand for RFID Tags
An ISA – FEEDBACK DocumentISA Confidential 2009 21
Strong regulations and technology convergence likely to help achieve realistic market numbers by 2014
Action points which would help
achieve realistic volumes
• Regulations
– Need for a strong regulation which
would govern and monitor smart
card implementation on a pan
India basis
– A consortium could ideally drive
smart card implementation
• Technology convergence
– Learnings from the global market
and showcase integration with
existing technology
• Inflection points for smart cards
– Faster implementation of pilot
projects and converge to
established applications
Segments
• Other applications like hotel cards, club cards, access cards are likely promising ones, along with the above listed key application segments
• The Indian market exhibits a huge limiting potential owing to the large population base
• Need for technology future proofing likely to be driven by the usage of 32 bit processors
Source: ISA – Feedback Study, 2009
An ISA – FEEDBACK DocumentISA Confidential 2009 22
In summary…
• While India offers a huge potential for smart cards, the biggest challenge is timely implementation and existence of strong regulatory policies
• Different Government departments need to work as a consolidated unit for successful implementation of smart card based projects
Learning from the global smart card market
Capabilities of Indian companies to address smart
card demand
Emerging trends – application and segments
• Suitability of new
applications, which can
be directly implemented
in India
• Technology barriers
overcome and converted
into proven success,
which could be replicated
in India
• NFC devices likely to be
the next level technology
products; doubly used as
a smart card and reader
terminal
• 16/32–bit cards expected
to become more popular,
governing the
applications built on
smart cards
• Strong base of system
integrators with exposure
to complex system
applications
• Import of select
components like chip sets,
high integrated application
smart cards, readers, etc.
Conclusion
An ISA – FEEDBACK DocumentISA Confidential 2009 23
Need for an active consortium comprising stakeholders in the smart card ecosystem to increase penetration of smart cards and redefine the market in India
Key challenges associated with smart card implementation
• Targeting mass population for smart card implementation likely to be a challenge as rural population is widespread
• Integration of services like authenticity of cards and processing specific applications from a remote location, likely to be a challenge
• Reaching out to the rural population and setting up a strongly networked infrastructure for smart cards
Way forward for the Indian semiconductor industry
• Import of semiconductor chips to address the potential; foundry set-up requires huge investments and rapid change in technology
• SC supplier needs to be a “solution provider” to reap higher benefits in the smart cards and identification business
• Associate strategically with key IT vendors who “ exercise” significant control over potential customers
• Proactive investments in pilots projects; unconditional supply of chipsets and RFID tags for developmental and pilot projects
• Leverage the experience of global markets to develop standardized solutions
An ISA – FEEDBACK DocumentISA Confidential 2009 24
Themes for Recommendations – Inputs from the Team (based on the things to be done to benefit the semicon industry)
• Government programs – Enlist various government programs which could potentially
make use of smart cards. Showcase the benefits to individuals and Government by usage
of smart cards for these programs
• Implementation and impact on economy - How will the use of smart cards impact the
economy as a whole – learnings from the global market
• Government policy and regulations – Flexibility in operations, interoperability, use of local
foundry
• UID to create opportunity for smart cards – Convince Government to include UID number
onto smart cards, along with biometric and photo image of individuals
• Benefits to the ecosystem – Enlist the benefits for the stakeholders/ companies involved in
the smart cards ecosystem from a semiconductor perspective
• Boost local manufacturing – Activities that could be locally managed (design,
manufacturing of cards, readers, etc.) relate to employment generation with local interest
An ISA – FEEDBACK DocumentISA Confidential 2009 25
Glossary of terms used in the document
Terms Definition
BEST Bombay Electric Supply and Transport Company
BPCL Bharat Petroleum Corporation Limited
bn Billion
DFRL Defense Food Research Laboratory
EMV Europay Master Visa
ESIC Employee State Insurance Corporation
HPCL Hindustan Petroleum Corporation Limited
INR Indian National Rupee
LPG Liquefied Petroleum Gas
mn Million
NFC Near Feed Communication
An ISA – FEEDBACK DocumentISA Confidential 2009 26
Glossary of terms used in the document
Terms Definition
NIC National Informatics Centre
NREGA National Rural Employment Guarantee Act
OS Operating System
RFID Radio Frequency Identification
RSBY Rashtriya Swasthya Bima Yojna
SIM System Interface Module
SMARS Smart Rupees
UID Unique Identification
USD United States Dollar
An ISA – FEEDBACK Document
Thank you
ISA Confidential 2009 27
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