NEW YORK-Gemplus Corp., Montgomeryville, Pa., gambled early and big on the nascent U.S. Global System for Mobile Communications personal communications services business. Today, it has won close to a 50-percent share of the subscriber identity module market.

Gemplus and Schlumberger Smart Cards & Systems, Telecom Division, Moorestown, N.J., another France-based chip maker, control about 85 percent of the domestic GSM PCS SIM card market. Orga Card Systems Inc., Paoli, Pa., and Giesecke & Devrient America Inc., Reston, Va., both with parent companies based in Germany, account for the remaining share.

The highly compressed and fast-paced nature of recent history and unfolding events in wireless telecommunications spell change for its suppliers, however.

Whereas there are about 50 million PCS users globally today, fewer than 1 million of them are in this country, “in all spectrums, in all interfaces,” said Richard Siber, worldwide managing director of wireless practice for Andersen Consulting, McLean, Va. Andersen is a strategic partner of Gemplus.

With such small numbers, Siber said, economies of scale are difficult to realize although the PCS subscriber base is growing in the United States, making it a more attractive market.

There also has always been a debate over the best location for the intelligence of a wireless system-the SIM card, the handset, the switch. But beyond wireless telecommunications, SIM cards have applicability in other areas, like electronic purse systems, that are widely used abroad but are just being introduced in the United States.

Standards, or the lack of them, have been another issue. Until last year, when the North American Interest Group released standards for SIM cards, there were none, said Cole Brodman, director of technology development for Western Wireless Corp., Issaquah, Wash.

“Gemplus was about the only one ready to go in North America when we were; once you choose a SIM card manufacturer, your billing system supports certain types of applications keyed to that SIM card,” Brodman said. “The standards now are in place that would allow us to support multiple SIM cards.”

Another area of opportunity for SIM card makers are Code Division Multiple Access PCS carriers. GSM technology has enjoyed a five-year lead on the use of SIM cards, but that doesn’t mean its exclusive use will remain intact indefinitely, said Gail Fraser, managing director of wireless enterprises for Andersen.

“CDMA is not SIM card-based, but both carriers and manufacturers are realizing its potential benefits (although) over-the-air (customer) activation without SIM cards in CDMA is possible. It’s a matter of whether the intelligence is in the handset or in the SIM card,” she said. “Gemplus has successfully trialed a CDMA handset in Asia, and Qualcomm (Inc.) announced at Asia Telecom in Singapore that it supports and will manufacture handsets with slots that accept SIM cards.”

Offering over-the-air customer activation using GSM SIM cards was a key differentiator for Gemplus early on in the United States, said Mark Ferdinands, who recently left his post as product manager of telecommunications for Giesecke & Devrient America.

Over the summer, G&D announced a reorganization of its smart card business, “following recent setbacks in securing new GSM/PCS SIM card business in Asia and the United States,” the company said.

“Despite internal market analysis, inputs from network operators and requests from local subsidiaries, G&D requires additional products and resources to serve the needs of customers beyond its core base in Europe.”

Gemplus had developed a protocol for over-the-air customer activation but had never implemented it on a live network before American Personal Communications/Sprint Spectrum L.P. approached it to create its phone-in-a-box plan, said Phillipe Martineau, director of Gemplus’ telecommunications business for the Americas.

“APC did a terrific job of marketing it, and it really was a major success,” he said, adding that the collaboration was key to jump starting Gemplus in the United States.

“Today, everyone has, more or less, an over-the-air solution,” Martineau said. “Gemplus’ GSM market share worldwide is 42 percent, and these aren’t just our figures. In the United States, it’s an even bigger market share. Market share changes all the time, and we expect ours to lower. But having a head start allows us to come up with better advances.”

For Brodman of Western Wireless, the presence of SIM card standards and the prospects of growth in smart cards for wireless telecommunications likely will create opportunities for Gemplus, G&D, Orga and Schlumberger to become auxiliary suppliers to those domestic carriers that didn’t pick them as sole suppliers initially. There also are a few Asian smart card makers that might enter the market, according to Fraser and Siber of Andersen.

“No one wants to be in a position of having a single source of supply, but there hasn’t been any event that has caused us concern,” Brodman said.

Some software changes are required before a carrier that has keyed its system to one SIM card supplier can support SIM cards made by another vendor.

“We’ve been focused on other business and would have addressed this if we felt it was urgent,” Brodman said. “In the next few months, we will address this. We can do it in a month if we put the resources into it.”


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