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Positions Largely Maintained, but Movement in Share Percentages Evident
ABI Research recently published its latest Smart Card Technologies market data iteration. The study established that just over 9.9 billion smart cards shipped in 2016, marking an overall disappointing year, with a YoY growth rate of a mere 3% achieved, driven by disappointing results within the payment cards market and a continued flattening of SIM card growth thanks to high maturity levels and market saturation.
But how did this disappointing year translate in terms of vendor activity and market share rankings? This insight will dig deeper into the vendor landscape in 2016, providing the context and reasonings behind any market share movement.
Full Year 2016 Results - Winners & Losers at a Glance
**Please note that market share percentages are based on a 2016 shipment level of 9.9 billion, a combination of smart cards delivered into all vertical markets, including enterprise and access control, government ID, payments, pay TV, retail and loyalty, SIM, telecom/payphone and transportation.
In 2016, there was significant movement within the market share rankings, not in terms of positions, but in terms of percentages, particularly true when compared to full year 2015 results. At a glance:
Gemalto’s market share remained relatively flat year on year.
Individually, OT maintained its overall share percentage with Morpho growing approximately 0.9% overall.
Combined, the new OT-Morpho entity would have achieved a full year 2016 market share of 22.5%, significantly closing the gap on Gemalto, a gap which previously stood at 12%.
Valid lost share, down 0.8% YoY.
With the exception of OT-Morpho, Giesecke & Devrient was the largest share winner, its share up 1.5% YoY.
Watchdata’s percentage was down 0.9% YoY.
Remember, the Traditional Smart Card Market isn’t Going Anywhere!
Gemalto’s market share remained relatively flat YoY, despite reductions in its SIM card market share, impacted by sales in Latin America, alongside the closure of Softcard, which directly impacted single wire protocol (SWP) sales in North America. However, Gemalto’s share reduction in the SIM sector was somewhat offset by gains in the government ID vertical.
OT-Morpho’s combined share of 22.5% places it in a strong second position. Moving forward, OT-Morpho may decrease further the percentage gap between itself and Gemalto due to a strong strategic presence in growing smart card markets, including India (payments) and Indonesia and India (SIM).
Overall, Giesecke & Devrient gained share, thanks to better than expected results within the payments and SIM markets. Vendor consolidation means that Giesecke & Devrient moved from fourth to third position overall.
Valid moved into the vacated fourth position, despite a 0.8% reduction in share, driven by lower than expected results in the United States payment cards market and localized difficulties in its native Brazilian SIM card market.
Watchdata completed the top five rankings, although dropping 0.8% share YoY, primarily driven by a reduction in SIM deliveries.
With the top two (Gemalto and OT-Morpho) likely to command a future market share in excess of 45%, there remains a real risk of increased pricing pressures. With vendor consolidation and possibly further consolidation round the corner, vendors may adopt a share gain strategy in order to maintain the higher levels of market presence they have become accustomed too. However, this will have a significant effect on the complete vendor landscape, the effects rippling to all smart card vendors, regardless of size and market focus.
While this may create a more competitive market landscape as vendors battle to gain market share and take advantage of any migration opportunities, it could significantly affect revenues and margins; a very risky strategy in an overall market which is not likely to experience growth rates above the 3 – 4% range annually in the near-term future.
It is true to say that the future growth opportunity resides in the IoT and supporting platforms and security services, which in turn will push the leading smart card vendors outside of the “hardware vendor” sigma, which has proven difficult to shift. Smart card vendors need to be more than card vendors, especially if more vertical markets such as SIM become further commoditised from a pricing perspective, paired with slowing growth driven by market maturity and saturation. In the same breath, the traditional market should not be forgotten about or dismissed. Although the smart card vendors continue to pivot business models towards supporting platforms and services, readying for the IoT opportunity, it is equally important to note that the traditional smart card market is not going anywhere. Although it may not be the revenue growth opportunity which will propel future smart card vendor revenues, it will remain an important and incumbent revenue source and a source which is likely to continue accounting for a very large proportion of any smart card vendor’s future revenue streams.