Modelamiento del Sistema

Product _{(Million units)}TM Volumes TDM Volumes for Local _{Sales (Million units)} TDM Volumes for Exports _{(Million units)}

2010 550 300 0.00 2011 600 375 0.00 2012 670 450 0.00 2013 620 540 0.00 2014 680 621 0.00 2015 650 714 0.00

Industry SWOT

The smart cards value chain comprises various material and component suppliers, system integrators, and the downstream segments like government, IT, transportation, banking etc. The Indian market is currently dominated by around 5 to 6 players who hold the majority of the market share for smart cards. All the top players in this product market have their own manufacturing facilities locally where assembly activity is carried out. The electronics components are imported while the on-card and off-card technologies are done locally. The software and integration part is carried out in-house and the plastic sheets are partially imported and partially sourced locally.

The smart cards value chain is depicted in the figure below.

Component and Sub-system Suppliers PETG PVC Plastic body Chipset Smart cards - OEM Smart cards - EMS IT / ITes Government Banking Telecom Softwares Memory Substrates Connector Microprocessor OS RoM Softwares Assemblers Downstream

R&D, design, technology licensors

The top players in this product market are Syscom, Madras Security Systems, Gemalto, Orga, VCT, Manipal technologies, Oberthur and G&D. Oberthur and G&D execute the majority of their projects in for banking applications. The greatest strength that lies in India with respect to this product market is that we have enormous software developing capabilities. On-card and Off-card technologies, interoperability, operating system development, hard mouse chips, embedding and milling capabilities are available in India. These are carried out by most of the top players locally which contributes to a high value addition in the manufacturing ecosystem.

Category Product Local Supply _{Manufacturing}Local _CapabilityLocal IP Company Names Local Value Level of Add Remarks Components and Sub systems Chipset Imports No No NXP, STMicroelectronics, Infineon, Renaissance, Atmel NA Antenna substrates Imports No No

AFK, French and US

companies NA

France and US holds the highest number of patents; no design

capability

Software Local Yes Yes In-house High

Plastic body Partial Imports, Partial Local supply Yes No Madras Security Printers, Manipal Press, Syscom, Bayer, United Tech

Star

High exists, but many OEMs prefer to Local manufacturing capability import from China, HongKong etc

Smart cards OEM Yes Yes No

Syscom, VCT, Oberthur, MSS, Gemalto, Oberthur, G&D High EMS No No No No NA

The table below captures the capability in India across the Smart cards value chain.

The challenges that the industry is currently facing is demand. Most of the announced new projects will take a few years to be operational and therefore capacity building will gradually rise when volumes go high. With respect to product design, the country lacks intellectual property in this field and most of it is owned by French and US companies on a technology front. The foreign companies dominate the patent environment with respect to chip and antenna substrates design. In spite of these challenges, smart cards still continue to be a high value add product which are also exported by the top players.

The SWOT chart below captures the analysis for the smart cards market.

STRENGTHS

Huge consumption demand, Government and Banking are the high growth end user segments

Software – OS development, chip management, on-card and off-card technologies are well established

Well developed EMS industry to carry out assembly activity

Continuous R&D to reduce overall cost and enhance customization

OPPORTUNITIES

High Growth potential in the planned Government projects

Increasing manufacturing and labour costs in China driving manufacturers to invest in facilities in India India as a export hub for servicing ME, North Africa and Europe countries

PMAS for smart cards to help boost local manufacturing

WEAKNESS

Reliance on imports for the electronics – System on chip

Lack of product design activities locally; No IP generation. Most patents held by French companies Constant pressure on manufacturers to reduce the

power unit size and increase efficiency

High risks in terms of security and hacking

THREATS

Well established manufacturing ecosystem in countries like China, Japan, Korea etc.

Well explored technology – France and US hold the highest number of patents for chip and substrate technology

Infrastructure inadequacy – sufficient power, water and

other utilities – uninterrupted availability

Component SWOT

The component ecosystem for Smart cards is quite simple across all types. The top 4 components that contribute to majority of the smart cards bill of materials (BoM) are:

1. IC

2. PETG/Polycarbonate body 3. Software OS

4. Antenna (wire or printed)

It is noted that India possesses design capabilities for the chip at the local design centres of MNCs such as NXP, Infineon and STM. However, lack of chip fabrication facilities results in negligible value addition contribution from design. Plastic is the second most expensive component in a smart card which is partially sourced locally and majorly imported from China, HongKong etc. Although there are numerous players in India who provide equally competitive PETG at competitive prices, many players still prefer to import owing to volume issues. Printing and personalization is thoroughly local. We do have personalization capabilities but lack of demand prohibits from exploring the same.

Strategic Conclusions

General

Smart cards are a high growth market possessing a huge export potential. Leveraging export subsidies and considering product manufacturing under the EPCG scheme will benefit manufacturers in importing machinery at subsidized prices and exporting huge volumes. Large presence of unbranded products in the grey market calls for a consideration of CVD tax on finished goods imports to prevent dumping of the same.