Global smart card IC market is projected to reach USD 3.9 billion by 2027 from an estimated USD 2.9 billion in 2022, at a CAGR of 6.3% from 2022 to 2027. The growth of the smart card IC market can be attributed to rise in the contactless payments post COVID-19 outbreak and adoption of ID cards across various organizations and educational institutions.

Smart card IC market in the Asia Pacific is expected to register the highest growth during the forecast period due to the ongoing technological innovations in the telecommunications, BFSI, government and healthcare, and transportation verticals, the increasing adoption of digital technologies, and rapid urbanization and industrialization.

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Drivers: Rise in contactless payments post COVID-19 outbreak

Earlier, most people were using contact-type smart cards. However, with the outbreak of the COVID-19 pandemic, people shifted towards contactless payment options. Contactless payment refers to a no-touch form of payment using a credit, debit, or gift card on a point-of-sale (POS) system equipped with adequate technology. Also, they are transactions made by tapping a contactless chip card, payment-enabled mobile device, QR code, or wearable device over a contactless-enabled payment terminal. These cards use radio frequency identification (RFID) technology and near-field communication (NFC) to process transactions. These cards emit short-range electromagnetic waves containing information to be captured by the POS system and processed to complete the transaction.

Opportunities: Increased adoption of IoT by end-user industries

Industry 4.0 fully automates manufacturing processes with very little to negligible human interference. It works on the Internet of Things (IoT), cyber-physical systems, cloud robotics, cloud computing, and big data. Thus, IoT has gained the attention of technology vendors, organizations, business decision-makers, and consumers in recent years. Industry players are focusing on adopting IoT due to continuous technological advancements, increasing cellular connectivity & data transfer rates, and cloud infrastructure development. IoT can be implemented using various smart and connected devices integrated into various smart payment systems, smart homes, and connected cars. Additionally, the rising penetration of IoT in telecommunications, BFSI, transportation, and retail end-user industries has led to an upsurge in the demand for low-cost and highly efficient smart card IC used for secured data storage and data transmission.

Challenges: Global semiconductor chip supply shortage

The trade war between the US and China added to the supply chain disruption. China being a key supplier of semiconductors, delay in the supply of semiconductors due to the increased tariffs rates and pandemic has created impediments in the development of smart card ICs industry. The increase in demand for chips and supply shortage has resulted in increased lead times as well as their price. Wafers, substrates, logistics, assembly and testing, and operational costs have all become more expensive. In turn, semiconductor suppliers are being forced to pass their costs on to their customers to help stabilize the supply chain.