Microsoft, Atmel in Smart Card Pact : Firms want cards in all PCs by 2000, analysts skeptical

Electronic News, May 17, 1999 by Peter Brown

San Jose-In a move designed to make smart cards a standard PC feature, Atmel Corp. and Microsoft Corp. have signed an agreement to develop a line of smart card chips for Windows-based systems.

The agreement calls for Microsoft to bring its Windows for Smart Cards operating system to Atmel's AT90SCXXX line of microcontrollers. The AT90SCXXX is a line of 16-bit RISC microcontrollers that feature an integrated cryptographic co-processor, flash and EEPROM memory.

With the agreement, Atmel becomes the first smart card chip vendor to have the Windows for Smart Cards operating system ported to its microcontrollers. Microsoft plans to work with the other major smart card chip vendors to receive a port of the operating system.

The Atmel deal is just one part of Microsoft's ambitious bid to bring smart card technology into the PC world. Microsoft in 1998 introduced Windows for Smart Cards to challenge the dominance of established operating systems like Sun Microsystems Inc.'s Java Card and MasterCard's MULTOS. The company by the year 2000 plans to make smart card support a standard feature of its Windows NT, Windows 2000 and Windows CE operating systems.

Microsoft claims that by the year 2000 all new PCs will include a smart card reader as standard equipment. The company believes that by the year 2002 as many as 2 billion smart cards could be using the Windows for Smart Cards operating system.

However, analysts are very skeptical of the technology making much headway during the next two years in the U.S. market, which is expected to be the primary region for PC smart card usage. It is unlikely that every new PC by the year 2000 will have a smart card reader, said Jim Feldhan, president of Semico Research, based in Phoenix, noting that proliferation of new features into the PC market historically has been more gradual.

Mike Paxton, industry analyst at Cahners In-Stat Group, Scottsdale, Ariz., agrees a year out is a bit too early for every PC to have some sort of smart card technology inside it. Paxton pointed to numerous smart card tests that have been done in the United States that have been dismal failures, including a major trial recently held in New York.

Jeffrey Katz, vice president of marketing at Atmel pointed to aggressive forecasts from the market research firm Dataquest for the smart card IC market. Dataquest predicts smart card IC sales will reach $3.7 billion by 2002, up from $1.2 billion in 1999. However, Dataquest also predicts that in 2002 only 41 million smart cards will be produced for computing applications.