Smart cards: the next molding bonanza?

Will chip-carrying cards become a booming business for injection molders? If the market's explosive growth continues, the answer could be a profitable 'yes' for those with the right mix of molding skills and machinery.

Open your wallet a few years from now and you'll likely see a "smart card" or two adding to the bulge in your billfold. At first glance, a smart card resembles an ordinary credit card. Both are plastic and about the same size. Look closer, and you'll see that the smart card has an integrated-circuit chip embedded in its face. The chip gives the card ability to store information. The "smartest" cards can even process data like tiny computers.

Already widespread in Europe, smart cards handle data related to banking, telecommunications, healthcare, cable television, mass transit, and all sorts of everyday transactions. With so many uses, it's not surprising that the quantity of cards in circulation worldwide has become enormous. The Smart Card Industry Association (SCIA) in Lawrenceville, N.J., estimates that more than one billion smart cards are currently in use. And the association, which includes the world's leading smart-card producers, forecasts a growth rate of more than 35% per year over the next three years, according to CEO Dan Cunningham.

In the U.S. alone, smart-card sales may reach 100 million cards annually by 2002, according to a recent study from Global Trade Consulting Co. in Indianapolis. Global's president Ken Eldib says that level of sales would represent "phenomenal growth," given that 1997 domestic sales were in the neighborhood of only 3.7 million cards.

For forward-thinking molders, the good news about smart cards is that an increasing number of them will be injection molded from ABS, as opposed to the laminated PVC sheet that currently dominates plastic card manufacturing. The bad news: Smart-card molding and chip insertion require pricey specialized manufacturing systems that won't fit everyone's pocketbook or technical capabilities.

Molding vs. laminating 

Phenomenal though it may be, not all the growth in smart cards will be easily tapped by molders. SCIA's Cunningham cites bank cards as one example. These cards must be embossed, and in the near term will likely sport both a chip and a magnetic stripe to ensure compatibility with standard credit-card readers. Both embossing and magnetic stripes pose a problem for the most common injection molding materials for smart cards - ABS and, to a lesser degree ABS/PC and ABS/PET blends. "ABS cards can't be embossed, and they won't take a magnetic stripe," explains Cunningham.

So the market for molded cards will be driven primarily by growth in those niches where molded cards already show some strength. The largest by far has been prepaid phone cards, Cunningham reports.

According to SCIA figures, injection molded cards make up somewhere around 20% of smart cards as a whole. But if you look at prepaid phone cards, of which more than 600 million have been issued worldwide, Cunningham guesses that upwards of 70% of these are injection molded. U.S. use of smart cards for telephones has thus far been modest - about 500,000 cards for the handful of U.S. phone companies with smart-card-compatible pay phones, says Cunningham. Other promising areas for molded cards include GSM (a European digital cellular-phone standard) and cable-television applications, he notes.

Experience counts

Another potential barrier to molders is the lack of experience in card making and/or handling delicate integrated-circuit chips. So far, most of the companies that make smart cards have had experience producing laminated cards or have a background in integrated-circuit packaging. "People in the smart-card business have historically been in other high-tech businesses or a spin-off of a semiconductor manufacturer," says Cunningham. Most of these companies, such as Gemplus and Schlumberger, began in Europe and gained a beachhead in the U.S. by acquiring domestic lamination plants.

Purely homegrown operations have usually also been started by individuals who know as much about integrated circuits as they do about injection molding. AMMI of San Jose, Calif., is one such example. "Our background was in semiconductors and integrated-circuit packaging," explains Ron Clunk, AMMI's president and CEO. AMMI's two smart-card production cells from Sempac SA of Switzerland produce molded, decorated, and electronically tested smart cards at a rate of 1500/hr. "We're achieving a 99.5% yield," says Clunk.

Despite their current lack of experience, custom molders may still be able to carve out a place in the smart-card market. Consider Wilden Plastic USA. This German-based custom molder, which molds smart cards in Europe, launched an operation about five years ago in Peachtree City, Ga. In addition to its other custom molding jobs, Wilden has one smart-card molding cell from Ferromatik Milacron running and another one on order, reports sales manager Ellie Gratz. Together these will give Wilden a yearly capacity of 40 million cards, which currently ship without chips.

For custom molders, Wilden's experience points to the big unanswered question about smart cards: Will there be any market for blank cards - those without chips? Gratz notes that much of Wilden's output of blank cards goes to Europe, where the smart-card market is much larger. But he believes that the U.S. market is small enough that molders will likely have to produce finished cards. "We're prepared to do it either way," she says, noting that Wilden could add chip-insertion lines if the demand warrants it.

Where molding has an edge

Molding offers a couple of inherent advantages that could contribute to its success. "Injection molding is a lot more consistent than the lamination process," explains Cunningham. Consistency drives up yields of a tight-tolerance, high-volume product like smart cards.

And in some cases, molding may be more productive though arguably not when it comes to producing just plain card bodies. Most commercial smart-card molding cells use four-cavity tools, while laminated cards are often die-cut from a sheet of 72 cards. Both laminated and molded blank cards require subsequent chip-embedding and decorating steps. But molded cards can be produced with the chip pocket molded in, saving the milling step needed for laminated cards.

Molded cards offer the clearest productivity advantages if they are part of an automated line that produces finished cards in one step with insert-molded chips and in-mold decoration. The Swiss Sempac system is the first commercial system of this type readily available in this country. It's based on a 99-ton Netstal Synergy injection machine.

AMMI thrives by taking advantage of the integrated line's productivity advantages while capitalizing on a few high-end niches within the smart-card market. Foregoing "commodity" cards, AMMI makes only high-tech cards that contain microprocessors and radio-frequency antennas for "contactless" reading. "It doesn't make sense for us to make a commodity card at 30[cents] each," explains Clunk.

Thanks to proprietary modifications of its Sempac line, AMMI has the ability to mold in the razor-thin connection between the chips and the RF antenna. By so doing, the company foregoes an expensive, time-consuming soldering operation, which is often performed by hand. "We're the only ones in the world who can do it," says Clunk of the company's molding process for contactless cards.

AMMI's focus on high-value cards enables it to chalk up significant sales at a time when the U.S. market has not really taken off. Clunk reports that about 70% of the company's output goes to offshore markets.

What equipment you'll need

Measuring about 8.5 x 5.5 mm and up to 0.5 mm thick, a smart-card body alone wouldn't pose too many problems for experienced thin-wall molders. But a few factors make smart-card molding more complex than it seems.

For one thing, dimensional tolerances on the pocket that holds the chip may vary from supplier to supplier, but they always fall into the precision molding range, reports Dan Morris, director of sales at Netstal Machinery.

For another, systems that produce "white cards" - blank, chipless cards - will need secondary operations to embed chips and, often, to decorate the cards.

Integrated systems, which roll chip insertion and decorating into a one-step process, can cost nearly $1 million. These integrated lines involve extensive automation for parts handling and other tasks. Sempac lines, an example of which Netstal showed at the NPE '97 show in Chicago, consist of a molding machine, robotic chip and label insertion system, parts remover, in-line circuit testing, and stacking device.

On top of the requirements for molding tight-tolerance, thin-wall card bodies and the likelihood of secondary operations, smart cards are a high-volume product. To be competitive, says Morris, you need cycle times around 9 sec for a finished card from an integrated line and less than 5 sec for a white card.

For all these reasons, the molding machines at the heart of a smart-card cell will tend to be premium machines. Typically, the molding cell will be built around a 100-110 ton machine running a four cavity tool. Netstal has supplied over 40 machines for smart-card molding worldwide, including approximately five in the U.S. Ferromatik Milacron supplied Wilden with its smart-card line in Peachtree City. It is built around a 110-ton hydraulic machine. Arburg recently announced that it has developed its own system for smart-card molding based on an Allrounder 270C press.

As for tooling, some molders, such as Wilden Plastics, have in-house capabilities to make their own. Commercial smart-card tooling is also available in this country from Dutch tooling supplier Axxicon, which recently opened offices in Georgia.