Britain’s electronic components industry has not had an easy ride this year, but potential growth in the smart card market is the silver lining in an otherwise overcast sky.
Brian Arthur, components and manufacturing director at the Federation of Electronics Industry (FEI) says: ‘1996 was not a vintage year for the electronic components industry. Dynamic memory prices hit the floor, bottoming in September 1996, later than elsewhere in Europe. Passive and electromechanical components suffered severe price erosion, dragged down by semiconductor memory. Discrete semiconductors also suffered but, despite all this, in 1996 average component prices increased over 1995.’
Despite poor trading periods in 1996, Arthur says there were signs of sales growth in late 1996, at a modest level. This recovery is predicted to continue through 1997 with microprocessors leading the way. There has been some improvement in memory price, but the market has some way to go to get back to the classic cost-per-bit curve for DRAM.
The FEI is still forecasting a 1997 UK market of around £7bn for all components; £5bn for actives; £1bn passives. The fastest growing market is LCDs, followed by resistor arrays.
The UK has a negative trade balance of £3bn for electronic components, with UK imports at £7.7bn and exports at £4.9bn. Hope for the UK industry lies in integrated circuits with continued investment in the UK and in connectors where the market for customised connectors sourced from Europe is growing.
‘The message is clear,’ said Arthur. ‘Europe, including the UK, needs to increase its electronic components production if it is to maintain a credible position in the world.’
Simon Green, business development manager of SGS-Thomson Microlectronics, a major supplier of ICs for the smart card market, sees massive potential for UK companies as the sector grows. The IC market will grow dramatically, he says, and he urges UK players to get on board.
‘There are not too many industries that could expect a compound average growth rate of around 47% per year over the next six years – leading to a market value of around $3bn sales of ICs by 2001.
‘My estimation of the value of the UK market is around $70m for 1996, and this may quadruple by 2001.’
Most European expertise lies in France – where the industry was born – and in Germany, with Gemplus, Schlumberger, Orga and G&D. However, there are some UK players involved including De La Rue, which acquired Philips Cartes & Systems of France, and GPT Card Technology.
The UK, says Green, is the venue for some exciting developments. ‘GSM is now well established, and the smart card is a key element in developing the relationship with the customer. BT Payphone seamlessly transferred to the chip card from the optical laser card, and will now look to expand applications outside telecoms. Market evaluation is taking place for the payphone card to be used with parking meters. A payphone product starts to become a simple electronic purse.’
Smart cards will be used for pay-per-view services, for loyalty cards in retailing, in banking, and in transport/telematics applications.
The availability of open software platforms – new multi-application environments, now being enabled by silicon technology – will, says Green, allow the card issuer to offer such items as electronic purses.
Two major multi-application operating systems are set to become industry standard, says Green: MultOS, from Mondex, and the JavaCard. The MultOS concept has been developed in the UK with the support of Mondex International.
According to Green, the most promising area of smart card technology is the ability to ‘post load’ applications in a similar way to the computer market – adding applications or programs as required during the life of the card – an advance that also reduces the time to market for new products. ‘The card manufacture process may be completed before the application is loaded to remove the lead time for silicon development process which may take four to five months,’ said Green.
‘Now is the time to seek relationships and form alliances by providing flexible and innovative solutions for the smart card market,’ he urged.