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January 2005 • Volume 9 Number 13
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Member Profile: SCM Microsystems
1. What are SCM Microsystems' main business profile and offerings? Most Alliance members know us for our complete line up of smart card reader technology used for secure access to PCs and networks. We are the global market leader in this space, and the U.S. market leader as well. One of our achievements is that SCM has shipped more than two million smart card readers to several departments and agencies including Defense, Justice, Treasury, Interior and Veterans Affairs. The normal business model for SCM is to work with OEMs and large system integrators, who often private label our equipment. Many Alliance members who are themselves technology providers are SCM customers. We recently added a family of physical access control terminals to our product line, positioned to work with biometrics and the new class of smart IDs for both the government and private sectors. These access terminals are modular so customers can mix and match features and technologies as they evolve their physical access control systems. They support biometrics and the more robust communications protocols needed with smart ID credentials. SCM is also the leading supplier of hardware security modules for digital television (DTV). Known as a Conditional Access Module (CAM), these devices plug into an open standards-based set-top box or integrated digital TV set to decrypt television broadcast signals. In addition, SCM manufactures interface technology for transferring content to and from digital flash media. Global headquarters for SCM are in Fremont, California, with European headquarters in Ismaning, Germany, north of Munich. SCM Microsystems is publicly traded on the Nasdaq under the symbol "SCMM" and on the Prime Standard of the Frankfurt exchange under the symbol "SMY." 2. What role does smart card technology play in supporting SCM Microsystems' business? Smart card reading and writing technology is a core capability of SCM and is part of almost everything we do. Certainly in our secure reader products line, everything is based on smart card technology. Our new line up of physical access control terminals is based on the changes taking place in that market to make use of smart card technology. Even in our DTV security module business, most of the units we produce work with a smart card. Smart card-based DTV security modules offer a high degree of protection against hacking and piracy for broadcasters, and are in many cases more affordable to deploy than set-top boxes with embedded decryption technology, which broadcasters have traditionally provided to their subscribers. 3. What trends do you see developing in the market that SCM Microsystems hopes to capitalize on? In different parts of the world different trends are developing that create opportunities for SCM. In Europe there are a number of large-scale initiatives for identity and health cards that will require readers. The migration of Europe to EMV creates opportunities for handheld readers like our myEMV product. We are very excited about epassport, and are supplying contactless readers to many companies involved in the development of these solutions for governments here and abroad. Making this evolution of the passport happen globally is no small feat. Despite the fact that contactless products are based on ISO standards and are in widespread use globally, each has its own "flavor," which results in a huge interoperability and integration issue. SCM Microsystems in particular has been working on addressing this global interoperability issue. As a manufacturing company that develops and sells both contactless smart card reading devices and components primarily to OEM customers, SCM is in something of a unique position to find a solution that satisfies everyone. As part of this effort SCM has an agreement with Sharp, and developed its contactless reader/writers to be compatible and interoperable with Sharp's range of contact/contactless smart cards and components. In DTV, the growth of new standards for broadcast security will create new opportunities for SCM. We support a standard called OpenCard that targets the U.S. market but was also adopted in Korea, and another standard called Common Interface, which targets Europe and Asia. In both cases the subscriber rights are distributed in a smart card, much like SIM cards in wireless phones. Now, DTV sets are being produced that are designed to accept our security module with no set top box. This lowers costs for broadcasters and gives consumers more flexibility in choosing broadcast services, and it will also be good for SCM. In the United States, the common federal access card driven by Homeland Security Presidential Directive 12 is of course a major growth opportunity, as well as the other government programs like Registered Traveler, if they start growing. Finally, we see the use of smart cards for IT security in the private sector as a market that will develop strongly and create significant demand for smart cards readers. 4. What obstacles to growth do you see that must be overcome to capitalize on these opportunities? Worldwide smart cards have a lot of traction in the public sector and the markets look like they will develop steadily. The biggest barrier is just the pace at which the standards can be created and the programs funded and implemented. In the DTV market, the technology also has traction and the smart card-based security modules business is starting to come. We have won recent awards in Korea, the United Kingdom and Turkey. In the IT sector, the biggest barrier seems to be getting management in the private sector to accept that passwords just won't cut it anymore and we need to move to smart card-based authentication. 5. What do you see are the key factors driving smart card technology in the market? The continued growth of the SIM marketplace, the emphasis on government for epassports, secure IDs, cyber security, increased physical access security, digital TV and the EMV movement in worldwide banking are all important factors. Of these I would single out HSPD 12, FIPS 201, and SB 800-73 as providing the framework for one card to be used by over 60 million people involved in government in some way or another. The presidential mandate (HSPD 12) calls for a secure and reliable form of identification, that is strongly resistant to identity fraud, tampering, counterfeiting, and terrorist exploitation, and can be rapidly authenticated electronically to be issued to all government agencies. This will open the smart card world to the entire government, possibly state and local governments, contractors, and many other companies that deal with the government. It will have a major impact on the smart card industry for the coming years. 6. How do you see your involvement in the Alliance helping SCM Microsystems become successful? Our involvement with the Smart Card Alliance has helped us build and maintain our relationships with business partners and government alike. We are contributing to the growth of the SCA by our involvement with the Secure ID Task Force and the Physical Access Council. For the smart card industry to be successful around the world we need the leaders of the industry to come together and solve the many needs of government and industry. 7. What was behind SCM's decision to introduce a family of physical access control terminals? With the advent of higher security ID badges, the marketplace for PACS 2.2 and GSC-IS 2.1 compatible smart cards readers and terminals is enormous. The Physical Access Interagency Interoperability Working Group (PAIIWG) has had their latest specifications approved by the Interagency Advisory Board. This document (PACS 2.2) lays the groundwork for new higher security standards for physical access control systems, and added many requirements that touch on core competencies of SCM. Most important is our knowledge of communicating with both contact and contactless smart cards. We also have strong relationships with the system integrators and OEMs who will be engineering the complete solutions for the government. Between the strength of our position and the significant changes taking place in this market we decided there is an opportunity for SCM to enter the market for physical access control terminals. SCM has embraced the PACS 2.2 access control requirements and has responded with PACS readers that comply with the low, medium, and high levels of security detailed in the document. SCM readers can read both contactless and contact smart cards and are the perfect choice for agencies who may need to start with contact smart cards that have already been issued but wish to transition to a later date to contactless cards.
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Smart Card Talk spoke with Robert Schneider , Chief Executive Officer (CEO) and Director of SCM Microsystems. Mr. Schneider founded SCM in May 1990 and has served as an officer and director of the company since that time. He is actively involved with several standards organizations in the PC, security and digital television industries. Before founding SCM, he worked at Intel Corporation Europe for over ten years, where he held a variety of sales and marketing positions. He holds a degree in engineering from HTBL Salzburg and a BA degree from the Akademie for Business Administration in Ueberlingen. 
