Peering into the Trends of Smart Card IC Usage

www.frost.comPeering into the trends of Smart Card IC Usage Prepared by: Jafizwaty Ishahak Associate Director, ICT Research Practice Frost & Sullivan, Asia Pacific 1

Frost & Sullivan www.frost.com The Growth Consulting Company• Founded in 1961 • APAC Presence for over 15 years• Over 1,700 Consultants / • Regional presence in APAC with over 500 Consultants and Industry Experts Analysts across 37+ global locations through 17 offices• Over 10,000 Clients Worldwide including • Strong relationships with Global MNCs majority Fortune 500 companies and key and regional SMEs in APAC players in the Investment Community 2

What Makes Us Unique www.frost.com oExclusively Focused on Growth 360 Perspective TM Global thought leader exclusively focused on Proprietary T.E.A.M. Methodology integrates all addressing client growth strategies and plans – 6 critical research methodologies to significantly Team actively engaged in researching and enhance the accuracy of decision making and developing of growth models that enable clients lower the risk of implementing growth strategies. to achieve aggressive growth objectives. Growth MonitoringIndustry Breadth Continuously monitor changing technology, Cover the broad spectrum of industries and markets and economics and proactively address technologies to provide clients with the ability to clients growth initiatives and position. look outside the box and discover new and innovative ideas. Trusted PartnerGlobal Perspective Working closely with client Growth Teams – helping them generate new growth initiatives and 32 global offices ensure that clients receive a leverage all of Frost & Sullivan assets to global coverage/perspective based on regional accelerate their growth. expertise. 3

Cross Vertical Industry Expertise www.frost.com AEROSPACE & AUTOMOTIVE & CHEMICALS, ENERGY & TRANSPORTATION MATERIALS & POWER SYSTEMS DEFENSE FOOD ENVIRONMENTAL & HEALTHCARE AUTOMATION & ICT BUILDING ELECTRONICS TECHNOLOGIES 4

Agenda www.frost.com History & Background & Technology Roadmap Evolution Market Key Market Drivers & Restraints Dynamics Trends Form Factors & Smart phone/Mobile Devices Highlights NFC M2M Key Take away 5

Agenda www.frost.com History & Background & Technology Roadmap Evolution Market Dynamics Trends & Highlights 6

Background & Technology Roadmap www.frost.com Smart Cards Smart Card Types MCU Memory Smart Card Contactless Contact Hybrid Combi Interfaces NFC m2m STANDARD In the interim – PLASTIC CARDS stickers, MicroSD * Multi Multi Application Various Form Application Factors Capability Capability Combi/dual interface Single Application Hybrid (With Magstripe) 512K Contactless Combi/dual interface Contactless Contact 256K Micro SIM 64KAPAC 4K 32K 16K 90s-2002 2006 2008/9 Source: Frost & Sullivan. 7

Myriad of Applications www.frost.com eID (Government ID, Smart Security) Financial services Home AutomationeHealthcare Transportation Telecommunication 8

Agenda www.frost.com Market Key Market Drivers & Restraints Dynamics Trends & Highlights 9

Market Dynamics www.frost.com Smart Cards Industry: Market Drivers and Restraints (World), 2010-2015 Government Transportation Growth in Projects & Urbanization Growth of DRIVERS Broadband HIGH Smartphones Penetration MEDIUM LOW RESTRAINTS LOW MEDIUM Smart Cards Interoperability Alternative Existing Security & Large Initial Technologies Privacy Concerns HIGH Investment Outlays Source: Frost & Sullivan 10

Global Passport and Split by Technology www.frost.com Global Passport Market, Number of Passports in Circulation by Technology (e-Passports and non e- Passports) (Global), 2005-2015 900.0 800.0 700.0 600.0 500.0 Non e-Passports 400.0 e-Passports 300.0 Passports (million) 200.0 100.0 0.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Non Standardization Global Standardization Machine Readable Biometric Passports Handwritten Machine Printed Passports Or Passports Passports (MRP) e-Passports Source: Frost & Sullivan 11

Agenda www.frost.com Market Dynamics Trends Form Factors & Smartphone /Mobile devices Highlights NFC M2M Key Take away 12

Market Overview www.frost.com In tandem with the growth in Telecom and telecom-related Decreasing cost of manufacturing broadband services, smart applications will continue to is a plus point contributing to smart cards appeal is further provide an area for high growth card expansion worldwide increased, especially in within the smart card industry banking and loyalty application transactions 13

Market Overview (Contd…) www.frost.comSmart Cards Industry: Smart Card SIM Unit Shipment (World), 2008-2016 Smart Cards Industry: Internet Penetration Rate (World), 2001-2010 6,000.0 35.00% 5,000.0 30.00% 28.70% Unit Shipment (Million) 25.00% Penetration rate 4,000.0 20.00% 20.00% 3,000.0 15.00% 2,000.0 10.00% 6.50% 5.00% 1,000.0 0.00% 01 02 03 04 05 06 07 08 09 10 0.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 Year Year Internet Penetration Rate Note: All figures are rounded; the base year is 2009. Source: Frost & Sullivan Source: Frost & Sullivan 14

APAC Total Mobile Device Sale Forecast www.frost.com Mobile Device Market: Mobile Device Unit Sale Forecasts (Asia Pacific), 2007-2015 1,000 0.25 Mobile Device Sale Growth Rate 900 Total Mobile Device Sales 800 0.2 700 (millions) 600 0.15 500 (%) 400 0.1 300 200 0.05 100 0 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 Total Mobile Device Sales (000s) Growth Rate (%) Note: All figures are rounded; the base year is 2009. Source: Frost & Sullivan 15

APAC Mobile Device Country Breakdown www.frost.com Mobile Device Market: Handset Sales by Country (Asia Pacific) 2009 & 2015 2009 Market Size: 489 million units 2015 Market Size: 882 million units Thailand Hong Kong Malaysia Taiw an Australia Philippines 2% Philippines Hong Kong Malaysia Taiw an Thailand Australia 1% 1% 2% 2% Singapore 1% 0% 1% 1% 1% 1% 2% Singapore Vietnam 1%New Zealand 0% 2% 0% Vietnam New Zealand South Korea 2% 0% 3% Indonesia China Indonesia 4% China 37% 4% South Korea 41% 5% Japan RoR 4% RoR 9% Japan 9% 7% India India 26% 31% Note: All figures are rounded; the base year is 2009. Source: Frost & Sullivan 16

Form Factors www.frost.comTotal Smart Cards Market : Common Smart Card Integrated Circuit Form Factors (Asia Pacific) STANDARD PLASTIC STANDARD CARDS FORM MINICARDS SIM CARDS WRISTBANDS WATCHES & Stickers PASSPORTS TOKENS USB DEVICES ALTERNATIVE FORM FACTORS MOBILE Embedded SIM DEVICES (NFC) Source: Frost & Sullivan 17

Contact and Contactless SCIC Form Factors www.frost.comTotal Smart Cards Market : Common Smart Cards Integrated Circuit Form Factors Divided byTechnology (Asia Pacific) PASSPORTS TOKENS MOBILE WRISTBANDS Contactless Smart DEVICES WATCHES Card Technology & Stickers STANDARD MINICARDS USB DEVICES Contact and PLASTIC Contactless Smart CARDS Card Technology SIM CARDS Contact Smart Card Technology Source: Frost & Sullivan 18

Form Factors – By Technology & Application www.frost.comContactless Smart Cards Market : Common Contactless Smart Cards Integrated Circuit Form Factors Divided by Technology and Application (Asia Pacific) Mass Transit Payment Access Control PASSPORTS TOKENS MOBILE WRISTBANDS Contactless Smart DEVICES WATCHES & Card Technology Stickers STANDARD MINICARDS USB DEVICES Contact and PLASTIC Contactless Smart CARDS Card Technology Government Identification Source : Frost & Sullivan 19

SIM Sizes www.frost.com SIM Cards Market: Comparison of Common Smart Cards Sizes to the 3FF SIM Cards (Asia Pacific) • Standard Card Size 54 x 85.6 mm • Mini Card 40 x 66 mm • GSM SIM Card (2FF) 15 x 25 mm • Mini-UICC (3FF) 12 x 15 mm Source: Frost & Sullivan 20

M2M Application Coverage www.frost.com Healthcare Smart Metering Automation IndustryTransportation m2m Safety & Emergency Consumer & Home Retail & Finance Industries specifically covered in this research Source: Frost & Sullivan 21

M2M Global Market Highlights www.frost.com Machine to Machine SIM Centric: Unit Forecasts (World), 2010- 160 2015 140 SIM centric M2M device (Millions of Units) 120 Retail & Finance Consumer & Home 100 Security Transportation 80 Healthcare Smart Meter 60 Building Industry 40 20 0 2010 2011 2012 2013 2014 2015 Note: All figures are rounded; the base year is 2009. Source: Frost & Sullivan 22

NFC www.frost.com Near Field Communication Access Control Payment Transportation Government ID Key Smart -Physical Access -Credit/Debit Cards -Mass Transit -National ID Card -Logical Access -Loyalty -Public Parking -Social Security Applications -Dual Access -Prepaid Value -Toll Collection -Health Cards Multiapplication Smart Cards Source: Frost & Sullivan 23

Market Analysis – NFC Market Position – Adoption www.frost.com Adoption Source: Frost & Sullivan Total volume of users As limited NFC handsets and uses are available, most NFC users at this point are software, hardware and mobile handset developers and enthusiasts Volume of new users Time Innovators Early Adopters Early Majority Late Majority Skeptics2–3% of Mobile 11–16% of New Users 30 – 38 % of New Users 30 – 38% of New Users 12 – 22 % of New UsersHandset Users 13 – 19% of Total Users 43 – 57% of Total Users 73 – 95% of New Users 78 – 100 % of Total UsersAdoption mainly Adoption mainly driven by enthusiasts Adoption driven mainly by Adoption driven mainly by Adoption mainly driven by aby enthusiasts and the technology savvy as well as those who can directly lowered costs and case of need and necessity asand developers. opportunists (be means of promotions benefit from the technology affordability as well as mass well as lack of choice (high and marketing events). as it is increasingly available. deployment and acceptance. mobile handset infiltration rate). 24

Market Analysis – NFC Market Position - Visibility www.frost.com• Introduced in 2002, NFC technology has since endured the ‘over expectations’ of the general public and in the last few years, asharp decline in interest. At this point however, NFC has moved into the ‘Growth Stage’ whereby expectations at this point arerelatively low and the first commercial rollouts have begun on a small scale.•The current position of NFC technology is demonstrated in the chart below. Source: Frost & Sullivan Visibility New interest in NFC. Beginning of the growth stage of NFC products and services. Time Introduction Inflation of Hype Decline of Hype Growth Stage Plateau Launch of a new product Over enthusiasm and Expectations are not met, Product and services of General public is well informed of / technology, minimal unrealistic expectations interest and expectations said technology catch up the progress of technology and media interest. in general begin to grow. slowly dissolve. with expectations. services and products available. 25

Market Analysis – NFC Market Position - Revenue www.frost.com Revenue Temporary trials have taken place and are being conducted, few commercial roll-outs have begun Time Source: Frost & Sullivan Introduction Growth Maturity DeclineUsers / Few – Trial of Early Growth Adopters – Trial of Growing selectivity of Saturation of users, drop-off in usage. Adopters Product / Services purchasesBuyersCompetitive Very Limited Entry of competitors fighting for Likely price wars & product Difficulty in market share growth or market share. Undifferentiated differentiation to gain market maintenance. Emphasis on efficiencyConditions products & services. share. and cost, exist of some competitors. 26

Market Movement – Projects in Asia Pacific – A Partial List www.frost.com Shanghai China Shanghai Seoul China South Korea Seoul South Korea Taiwan ChongQing China Taiwan Bangalore India Taiwan Taiwan Bangkok Thailand Bangkok Thailand Xiamen China The Philippines Singapore Melbourne Australia Kuala Lumpur Malaysia Jakarta Melbourne Singapore Singapore Indonesia Australia Source: Frost & Sullivan 27

NFC - Ecosystem www.frost.com NFC ecosystem Mobile Handset Units: Forecast (World), 2009-2015 1,800 1,600 Mobile Handset Units (Million) 1,400 1,200 ( 1,000 800 600 400 200 0 2009 2010 2011 2012 2013 2014 2015Standard mobile phone 1152 1194 1180 1056 963 815 765NFC-enabled mobile 7 39 128 315 536 748 863 phone Source: Frost & Sullivan Source: Frost & Sullivan 28

Trends – Evolution of NFC Applications www.frost.comWIDESPREAD ADOPTION OF NFC (~75% of Mobile Handsets NFC Enabled) P2P Fund Transfer Entertainment Standardization C-B-C Payments Personalization of Services Industrial Data Transfer P2P Data Transfer Cyber Marketing Loyalty Programs Commercial Payment Collection Third Party Connection Initiator PC- Handset Synchronization Growing Acceptance in Targeted Promotions Industrial Process Transportation Niche Advertising Monitoring Logical Access Control Adoption and Development Electronic Toll Collection Industrial Growing Retail Acceptance by hobbyists / enthusiasts Automated Fare Collection Personal Retail Franchise Mass Transit Ticketing Micro-Payments Commercial Source: Frost & Sullivan 29

NFC Payment Services www.frost.com NFC Payment: Transaction Value Estimation (World), 2009-2015 120.00 100.00 Transaction Value (€ Billions) ( 80.00 60.00 40.00 20.00 0.00 2009 2010 2011 2012 2013 2014 2015 World 1.48 2.22 3.84 12.94 31.35 61.21 111.19 EU 0.01 0.02 0.73 3.95 11.82 23.56 41.87 NA 0.01 0.02 0.37 2.00 7.50 13.20 25.19 ASPAC 1.29 1.48 1.77 5.54 10.25 22.26 39.33 Rest-of-World 0.17 0.70 0.97 1.45 1.78 2.20 4.81 Source: Frost & Sullivan 30

Key Take Away www.frost.com Smart Card IC Industry: Market & Tech Trends Summary (World), 2010-2015 Increased Emphasis on Continued Expansion of the Security & Convenience in the Telecommunication Industry Financial Services Industry STANDARD Market & Various Form PLASTIC Tech. factors CARDS Trends Additional Smart Card Applications: Demand from Government M2M, Healthcare & Agencies Insurance, Smart Metering, Loyalty Tracking Source: Frost & Sullivan 31

www.frost.comResearch Coverage & Calendar 32

Research Scope: The new Smart Card Ecosystem www.frost.com eID (Government ID, Smart Security) Financial services Home Automatio n m2meHealthcar e Transportation Network Smartcard Readers Operators 33

2011 Global Research Plan: Smart Cards www.frost.comQ1• eID route to success (MI)• Africa & Sub Sahara (MI)• SIM Verticals business opportunities (MI)Q2• Forecaster (ME)• Personalization and certification where is the value added (MI)• Financial (EMV, Contactless) (MI)Q3• Qualitative Forecaster (ME)• China / Asia opportunities (MI)Q4• M2M where are we finally today ?(MI)• SIM cards market in emerging countries (MI)• World Corporate Security Smart Card Markets (MI) 34

Frost & Sullivan –Identified Over 30 Mega Trends www.frost.com Impact of Mega Trends on Key OrganizationalDefinition: FunctionsWhat is a Mega Trend? • Mega trends are global, sustained and macro economic forces of development that impact business, economy, society, cultures and personal lives Marketing thereby defining our future world and its increasing pace of change.Why Do Mega Trends Matter? • Mega trends have diverse meanings and impacts for different industries, companies and individuals. Analysis of these mega trends and their implications forms an Innovation R&D Budget important component of a company’s future Scouting Spending strategy, development and innovation process, and impacts product and technology planning. • The following document sets the stage for visionary Megatrends thinking by identifying the most important global mega trends, potential scenarios of specific trends in 2020, and the implications of these mega trends in transforming society, markets and cultures. These mega trends can be used as a base for strategic decision- making by understanding their impact on organizational functions such as marketing, Research and Development (R&D) budget spending, product planning Product and development, human resource Technology Planning and management, technology planning and innovation Planning Development scouting. 35

Thank you – Your Growth Partner www.frost.comJafizwaty Ishahak Jean-Noël GeorgesAssociate Director Global Program DirectorAsia Pacific, ICT Practise ICT - Smart Cardjishahak@frost.com Jean-Noel.georges@frost.comTel. +603 6204 5830 Tel. +33 (0)4 93 00 61 87 Damien See Senior Industry Analyst ICT - Smart Card damien.see@frost.com Tel. +603 6207 1018 36

Additional Information: www.frost.com Donna Jeremiah Carrie Low Associate Director Executive Corporate Communications Corporate Communications Tel. (603) 6204 5832 Tel. (603) 6204 5910 djeremiah@frost.com carrie.low@frost.com Jessie Loh Manager Corporate Communications Tel. (65) 6890 0942 jessie.loh@frost.com 37

Peering into the Trends of Smart Card IC Usage

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