There was much talk 2 years ago about a slump in the GSM market but 2003 surprised everyone. Adjustments in expectations were made on a monthly basis by all vendors involved in the smart card industry. Units in the SIM area grew at a phenomenal rate leaving a very healthy growing market. However, revenues did not follow route, they did not provide the same growth units offered.
Clear trends of a better product mix have been seen as many countries move to higher-memory SIM cards. This better product mix kept the average selling prices (ASPs) flat, negating any pricing pressure experienced in previous years. Demand for 64k and 128k SIM cards was experienced in Europe and Asia Pacific. The largest market, China, where most ICs are 16k, is also witnessing migration to higher-memory ICs. North America is already a 32k market that is migrating to 64k ICs.
In 2004, the smart card and chip markets are expected to rebound with vendors remaining focused on the SIM market, followed by banking and ID application segments. Global SIM unit shipments are expected to continue to grow in 2004 due to penetration in less SIM saturated markets in Asia Pacific and the Americas. An increasing demand for high-memory 64k and 128k SIM cards as well as the growing demand for Java cards is also improving the product mix. 128k SIM cards are already being supplied to Telecom Italia Mobile (TIM) as well as a couple of other mobile operators. Prices of SIM ICs in 2004 are either likely to remain flat or slightly increase due to a demand-supply gap.
The banking application is expected to experience good growth rates due to EMV migration in Europe. The contactless market is also expected to surge with interest and eventual high volume demand from secure travel documents. Though there are increasing shipments of 64k and 128k ICs, a majority of the shipments remain ICs of 32k and lower.
One of the key challenges for semiconductor vendors is that its customers tend to underestimate vertical market sizes. Chip manufacturers need good forecast from their customers and service providers in order to better plan their production and to align demand and supply of chip ICs effectively. However, this is rarely the case causing discrepancies in demand and supply of chip ICs.