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IMPORTING SOME FRENCH SAVOIR-FAIREWhen GE Capital began prospecting last fall for a stake in the burgeoning market for microprocessor-equipped smart cards, its first choice wasn't a hot California startup. It wasn't even a U.S. company. On Apr. 21, the financial services company took a 5% stake in France's Gemplus Card International, a $440 million smart-card manufacturer. It's only logical. France is the birthplace of smart-card technology, and Gemplus is one of its pioneers. Founded nine years ago by engineers from Thomson Semiconductor, Gemplus got off to an auspicious start. It developed the first prepaid phone card for France Telecom--and helped launch an industry. Today, Europe is the leading market for smart cards, topping $600 million. And Gemplus has more than a third of the $1 billion worldwide market. MUSCLE. Now it's targeting the U.S., where the market is expected to more than than triple by 2000, to about $150 million and 100 million units, says Dataquest Inc. When VISA, MasterCard and AT&T begin issuing millions of smart cards, they'll need someone to manufacture them. Gemplus plans to be that someone. To get ready for the U.S. market, it bought out Minneapolis-based Data-card's card manufacturing facilities, where today it makes Hewlett-Packard's ImagineCard, a smart card used for securing Internet access. And GE Capital gives Gemplus the financial muscle and credibility it needs to win big in the U.S. But Gemplus isn't the only one eyeing the U.S. market. Schlumberger Ltd., whose Paris-based Electronic Transactions group is the No.2 cardmaker, also is muscling into the U.S. In 1994, the company acquired Malco Inc., a large U.S. credit-card maker. It supplied the cards used in VISA's Olympic smart-card trial last year, and got a jump by being the first out with a prototype card that runs Sun Microsystems Inc.'s Java software. That software will allow the thousands of Java developers to create new applications for smart cards. Gemplus CEO Marc Lassus is betting instead on second-generation Java Card technology due out in September, which he figures will be more stable. Java or no, Gemplus still dominates the market, selling 300 million smart cards last year, nearly double the 120 million sold by Schlumberger. ''It's a two-horse race in the U.S.,'' says David Weisman, a Forrester Research Inc. analyst.
And they're off.
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Updated June 15, 1997 by bwwebmaster
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