This report has been released by John DEVLIN, Principal Analyst & Founder of P.A.ID Strategies and host of TRUSTECH’s innovation stage. The Impact Report summarises the market situation and short-term outlook with guidance on how P.A.ID Strategies is adjusting its forecasts in 2020 as a result of the latest developments. It includes analysis and discussion of Mobile and SIM, eSIM, Payment and Banking, ID and Authentication, Ticketing and Access Control, and Embedded Security Solutions in areas such as IoT, IT, Automotive, Smart Home and Consumer, Logistics and Supply Chain. About P.A.ID Strategies: P.A.ID Strategies tracks and forecasts the market for 10 IC solutions used to secure credentials, embedded and IoT devices across 5 major verticals for smart cards and related devices, plus 7 leading IoT and M2M sectors. It provides a holistic view of the market, detailing how traditional smart cards and new embedded solutions are being employed to deliver and enable trusted services.

1. The Impact of Covid-19 on Smart Cards
and Embedded Security (will be
significant in 2020 and could last
longer)
This ImpactReportand itscontentare copyrightof P.A.IDStrategies,publishedinMay2020. Any
redistributionorreproductionof partor all of the contentsinanyform isprohibitedwithoutprior
writtenagreementfromP.A.IDStrategies.
We have been indiscussionwithanumberof companiesastheyevaluatethe currentpositionof
theirbusinessesandlooktotry andensure theyhave the rightstrategiestobestnavigate the
widespreaddisruptionbeingcausedbythe Covid-19pandemic. These two-waydiscussions,
answeringquestionsandofferingopinionwhilstlearningof the short-termchallengesfacingthem,
allowusto formulate abetterpicture of the marketoutlookforthe varioussmart card and
embeddedsecurityapplicationsthatwe provide market intelligenceon. Thisimpactreportprovides
a summaryof our viewsonthe marketandwe will continuetomonitorandupdate ourguidance
and forecastsinour upcomingpublicationof dataandreports.
A recentblog, “Secure TechnologiesCanHelpPeople Work,Shop+Travel Safelyina Post- Covid-19
World”examinesthe longer-termeffectsof the pandemic.

2. Mobile + SIM
We estimate thatglobal smartphone salesforthe yearwill be down15-20%. Thisisbasedon actual
salesfiguresfromChinainQ1 2020 and initial resultsfromOEMs,mobile operatorsandothersales
channels. There will likelybe adegree of recoveryascountriescome outof lockdownhowever,the
disruptiontothe supplychainin1H 2020 hasbeensubstantial withproductionandsalesdownby
over40% insome countries. April’ssalesfiguresforChina(the firstcountrytocome out of
prolongedlockdown) showedaYoY increase of 14%, however,we believethatanypent-updemand
will be temperedbypoorereconomicconditionsaffectingconsumerspending,withmanycountries
alreadyenteringrecognisedrecessionstatusinQ22020.
Thishas a knock-oneffect;withlesssmartphone salesthere isanatural reductioninchurnand new
contracts – a primarydriverforSIMcard shipments. Relatedtothis,2019 saw the firstreductionin
SIMshipmentsforyearsassmartphone lifecyclesincreasedandreplacementratesdeclined,atrend
whichP.A.IDStrategieswasthe firsttopredictandhighlightayearago. The closure of manyretail
outletsisalsoa factor,makingit more challengingandaddingabarrierto the SIMcard registration
processregulatedinmanycountries. Fallingeconomicperformancemayactuallyprovide abitof a
boostto SIMcard shipments –as consumersstartto shoparound formore cost effective contracts
and offers – althoughwe donot expectittooffsetthe heavyinitialdecline andlowersmartphone
saleswill dragonuntil at leastthe endof the year.
As a result of thesefactorswe arelowering ourforecast(which wasalready flatafterdeclines in
2018 and 2019) forSIMcard shipmentsby 10-15% in 2020.

3. eSIM
eSIM
The eSIMmarketis differenttothatfor SIMcards as it isstill a relativelynascentmarket,lookingto
buildandgrow itsinstalledbase. Previouslydominatedbythe automotive market,in2019 we
recordedgreatershipmentof eSIMsinsmartphonesforthe firsttime. The automotivemarkethas
beenhitheavilybythe Covid-19pandemicwithsalesreporteddownbyover90% insome countries
at the peakof theirlockdown,clearlyrestrictingshipmentof eSIM-equippedvehicles. Asamuch
higher-value transaction,automotive saleswillbe more heavilyhitbythe currenteconomic
slowdown,acceleratingwhatwasalreadyamarketsetto decline in2020, followinga5% fall in2019.
We believe thatautomotivesaleswill be down20-25% in2020.
As statedabove,smartphone salesare forecasttobe 15-20% lowerin2020. However,foreSIMit is
more complicatedthanthisas ithas beenthe case that eSIMshave beenpredominantlyafeature of
more expensive models,specificallyiPhonesaswell asGoogle’sPixelmodelsalthoughSamsunghas
nowaddedit to itsnewGalaxyS20 familyanditsZ-Flip,ashasMotorola inthe firsteSIM-onlydevice
withthe RAZR unveiledlastyear. These are all flagshipmodelsatthe higher-endof the price
spectrumandwhilstaverage retail priceshave beenpushedupandinitial figuresreportedare
promising,theyare more susceptible inprice-sensitive environments. Itisnot all doomand gloom
though,we believe thatthe game changerforeSIMsmartphonesisApple’snewlyannouncediPhone
SE, pricedmore competitivelyinthe mid-tier. We expectthatthiswill be apopularmodel andwill
account fora large proportionof neweSIMshipmentsthisyear,promptingotherOEMsto follow
suitand in-turn,mobileoperatorstoincrease availabilityandsupportforeSIM.
It shouldbe notedthatsome countries,includingChina,still limitorbaneSIMusage in smartphones
whichrestrictssome potential high-volume markets. Takingall of these factorsintoaccountwe are

4. reducingourforecastfor eSIM-equippedsmartphonesalesby5-10% fromour previousestimate for
2020.
The remaininguse of eSIMsisprincipallyinM2M andIoT applications. We believethatthese are
largelymore resilientthanconsumerapplicationsandwhilstthere willbe inevitable disruptionto
deployments,itcanbe arguedthat the abilityof eSIMsto enable more connectivityandremote
monitoring,managementandmaintenance will drivegreateradoptioninthe long-term. Investment
inthese typesof capabilitiesandthe resiliencethattheyofferwillbe attractive,especiallyforfield-
baseddeploymentsandlogisticsandsupplychainapplications. There are increasedeffortsfrom
some solutionprovidersaroundiSIMtoobut fornow we expectthe pandemictohave onlya limited
impact(<5%) oneSIMadoptionthisyear.
As a result, P.A.IDStrategiesis lowering its forecastforoverall eSIMshipmentsin 2020 (acrossall
consumer,mobile,M2Mand IoT applications) by ~15%.
Payment + Banking
The current forecastforpaymentcards wasalreadyflat(with minimal shipmentgrowth) in2020
baseduponthe natural slowdowninmarkets,suchasthe US and China,whichhave beenboosting
the marketoverthe pasttwo years. However,the disruptionbeingcausedbythe lockdowninmany
countrieswill affectthe marketindifferentways. Adoptionof electronicpaymentsanddigital
walletsisacceleratingunderlockdownwithpeople more waryof handlingcash. Thisisclearly
visible inthe jumpinthe numberof card transactionsbeingreportedinmanycountries,particularly
contactlesstransactions. Aidedbythe increasingof transactionlimitsin>30 countries,contactlessis
nowaccountingfor as muchas 70% or more of POScard transactionsinthe Nordics,Canada,
Australiaandothers,anincrease of >10% insome. NFC transactionsformobile walletsare also

5. receivingaboost,albeitata much lowerlevel(5-15% of potential users). STCoperatesthe most
populardigital walletinthe Middle Eastandrecentlyannounced30% growth(alsoboostedbythe
recharge limitbeingincreased). There are alsoeffortstodrive alternative mobilepayments
solutions,withQRcodesfeaturinginPayPal’snew appbeingone clearexample tobuildonthis
unexpectedmomentum.
Whilst we estimatethat newusers/accountsmakeup <30% of cardsissued there could still be an
effecton theoverall market.
Usage of contactlesscards anddigital walletsisincreasingamongstexistingusersbutthere are
differenceswhenlookingattheirgrowthprospects. Itisrelativelyeasyfordigitalwalletstogrow
theiruser-base duringtimeslikethese;theyare digital solutionsafterall andare set-upforremote
sign-upandauthenticationof newusers,oftenable toleverage existing3rdpartyaccounts to verify
users’credentialsandfinancial credibility. Tosome degree,thisisreplicatedbythe neobanksand
challengerswhoare principallydigital organisations. Theymaybe a little more limitedinsome
respectsbuttheyhave the correct digital identityverificationandauthenticationmechanismsin
place to on-boardcustomerssimplyandquickly. Whilstthisbooststhe numberof new usersand
associatedcardsissued,theyremainasmall proportionof the overall market,bothintermsof
geographiccoverage andsize of customerbase. Similarly, the numberof cardsbeingissuedbywhat
previouslywere servicesonlyofferingvirtual cards,e.g.OEMPay services,remainquite small,even
withGoogle,SamsungandHuawei all expectedtolaunchphysical cardsintegratedintotheirdigital
wallets.
We believe thatbankcard replacementcyclesshouldbe maintainedwithminimal disruptionduring
lockdown,furtherhelpingtomaintainpaymentcardvolumesin2020. The biggerissue will be those
lookingtoopena newaccount withincumbentbankstypicallycontinuingtorequire
physical/personalverificationof auser’sidentitytofinaliseaccountopening. The lockdowns
affectingmanycountrieswill preventordelaythisandcouldaidadoptionof alternative payment
services. Whilstwe estimate thatnewusers/accountsmake up<30% of cards issuedthere couldstill
be an effectonthe overall market.
Taking all thesefactorsinto consideration,P.A.IDStrategiesislowering its forecastforpaymentcard
shipmentsin 2020 by 2-3%.
As a final commentonpaymentandbanking,we believethatitispossible thatbanksmayrespond
to Covid-19by increasingissuanceof contactlesscards,lookingtoserve the new userbehaviours
that we are trackingand expecttolastbeyondthe pandemic. Whilstitislikelythat thismayaffect
onlyup to5% of cards issued,itcouldincrease the value of the overall marketslightly,offsettingany
decrease inmarketvolume. Conversely,we donotexpectbankstolooktospeedupthe pilotsand
trialsof biometriccards. Whilstan argumentcan be made that biometriccardswill enable secure
higher-value contactlesstransactionstobe completed,itwouldbe veryunusualforbanksto
increase expenditure onnewtechnologies/programsduringaneconomicdownturn. If anything,itis
likelythatCovid-19will delaythe initial launchesof suchcards(unlessthere isacleardemandfrom
the marketand financial benefitforthe cardissuers).

6. ID + Authentication
The market forgovernmenteIDisa muchsimplerpropositionthanpaymentandbankingsince it
featuresfewerinfluencingfactorsandoverlappingdrivers/barriers. Itistypicallyamuch more
stable market,beinggovernmentfundedandoftenrelatestogovernmentspendingprogramsand
the supportof newlocal andnational programsand services. Governmentshave beengenerally
increasingtheirfocusoninclusiveanddigital programsfortaxesandpayments,vehicleregistration,
immigration,healthcare,welfare,etc.andwe believethatthiswill continue becauseinadditionto
the citizenbenefitsitoffersgreatercost-effectiveness(andsecurity) thantraditional paper-based
solutions.
Governmentissuedcredentialsanddocumentswillcontinuetoact as the foundationforsuch
servicesandwe donot expectmany(if any) governmentstocut backin these areas. If the economic
recessionisprolongeditcouldaffectthe introductionof new programsbutatthistime the general
consensusisthateconomieswilllargelyexperience ashort,sharpshock withrecoveryexpectedin1-
2 years.

7. There couldbe a limiteddownturnthisyearineIDcardsissuedasa resultof the disruptionresulting
fromlockdown,mainlydue tothe temporaryclosure of governmentofficesand operationsthat
wouldbe usedtoregisternewandrenew existingnationalIDandhealthcare cardsand epassports.
Some governmentshave announced6-12extensionstoexpirationdatestoaccommodate this. Itis
likelythatthe lowerrate of travel andimmigrationcouldalsoresultinatemporaryfall indemand
for workand residencypermitsandvisas.
As a result, whilst weexpect only limited impacton eID credentials in 2020 butit is possible thatit
could be up to 5% lowerthan previously forecast,however,webelievethatthis will largely be made
up with increased demand and issuancein 2021.
Ticketing + Access Control
Thiscouldbe one of the mostaffectedsectors. Withthe (temporary) shutdownof manysectors,
includinghospitalityandleisure, thereislikelytobe a notable reductionindemandforaccess
control cards for gyms,hotels,etc. Educationwill continue toissue cardsbutthere couldbe a short-
termimpact due to enrolmentprocessesbeingdelayedandaffected. Itislessclearwhenlookingat
employeeIDandaccess control. Clearly,companieswillcontinuetorequire employee IDsfor
physical andfor logical accesscontrol,particularlyrelevantwhenlookingtosupportworkerswith
secure remote accessto email,filesandservices. The affectsonthiscouldbe more pronouncedin
the longer-termascompanieslooktoevolvetheiroperationalset-upwithagreaterproportionof
theirworkforcesbeingoff-site –we maysee more use of virtual/mobile credentialsandsolutions
beingemployedbutitislikelytobe inconjunctionwithphysical cards(atleastinthe short-term).
However,a reductiondue to fewernewand replacementcards being issuedisinevitable and
P.A.ID Strategiesis reducingits forecast by 15% as a result.
Whilstthere will be continuedneedforpublictransportationP.A.IDStrategiesexpectsanotable
reductionindemandinH1 2020. With muchreducedmovementbothforworkandfor leisure there
will be farfewersalesof one-time andlimiteduse tickets. We donot believe thatthiswill affect

8. reusable/top-upcards/accountsasmuchbutdemandfornew cards and replacementswillbe
affected,evenif onlytemporarily. Longer-term,itisprobable thatincreasedpublicspendingon
infrastructure projectswillbe introducedinanefforttocounterthe economiceffectsof Covid-19.
Thiswill include new projectsandmodernisationof existingtransportationnetworks,lookingto
introduce improvedcrossoverandticketingcapabilitiesaspartof wider “mobilityasa service”
(MaaS) initiatives. Multi-applicationcardsandmobile appsforticketingwill increasinglyfeature as
part of these programsandcouldprovide addedgrowthtothe marketfor smart transittickets.
However,itisrecognisedthatlong-termandon-goingdemandwill be lowerasa resultof
behavioural changesanduserpreferencesresultingfromthe Covid-19pandemic. P.A.IDStrategies
is reducingits forecast for mass transit ticketingby 20-25% for 2020 and will also be adjustingits
longer-termforecastsby as much as 5-10%.
Please note thatthisonlyaddressesreusable/top-upcardswhichfeature microcontrollers. We
believethatthere will be agreaterimpactonlimiteduse/one-time use memorytickets.
Embedded Security Solutions
Generally,we believethatthe demandforotherembeddedsecuritysolutions,suchasembedded
secure elements,TPMs,on-chipHSMs,TEEs authenticationICsandsecure microprocessorswillbe
primarilydrivenandaffectedbyeconomicfactors. There couldbe a boostforauthenticationICsas
manufacturersandbrandslookto strengthenbrandprotectioninitiativesandsimilarlyforother
solutionstosecure theirsupplychains. However,itislikelythatdemandforcars,smart home
devices,industrial equipmentandinstallationswillbe reducedinthe face of uncertaineconomic
performance.
One (short-lived)bright-spotforTPMswas the boostinPC and laptopsalesascompanieslookedto
equiptheiremployeestoworkfromhome towardsthe endof 1Q 2020. However,there islikelyto
be a downturninthe remainderof the yearas replacementof on-site equipmentwillslow either
due to feweremployeesbeinginthe office orbudgetsbeingheldbackinthe face of economic
uncertainty. Itremainstobe seenif thisreturnsto “normal”nextyearbut the downturnin
computersalesisnotexpectedtobe beyondwhatwaspreviouslyforecast.

9. A 20-25% downturninautomotive will impactdemandforTEEs,TPMs and some HSM-on-chip
securitysolutions(aswell aseSIMas exploredearlierinthisreport). Itislessclearhow the
Industrial andUtilitiessectorswillfare andwhatthe subsequenteffectwill be onthe demandfor
embeddedsecuritysolutions. Generally,P.A.IDStrategiesbelievesthatthese will be largely
unaffectedalthoughthere couldbe exceptionsif anyeconomicuncertaintyisprolongedorresultsin
political instability. The primarysolutionsbeingpositionedtothese sectorsare TPM,authentication
ICs andeSIMand anyimpact resultingfromCovid-19shouldbe limitedascompaniesandservice
providerscontinue tofocusonimprovingtheirresilience andenhancingcybersecurityagainstany
attacks. Governmentsandregulatorybodieswill alsohave arole toplayas theyincrease activityto
ensure thatmanufacturingandcritical infrastructure isprotected.
As we have saidpreviously,SmartHome + ConsumerIoTisveryfragmentedintermsof a wide
breadthof devicesandapplicationswithlittleornoconsistencytodate intermsof the best
(embedded) securityapproach. The mostconsistentnote isthatitisinconsistentwithmultiple
platformsandstrategiesbeingemployedandthatitistypicallyverycost-sensitive,resultingin
securitybeingviewedassomethingthatcanbe provided/fixedwhenitisnecessary. There is
increasedregulatoryactivitystartingtobe putin place bya numberof countries/statesbutitisopen
to a degree of interpretationhowthiswill be affected. Giventhe cost-sensitivityandmore
consumer-orientatednature of thiscategoryitisexpectedthatanyeconomicdownturnwillhave a
notable impactondevice salesanddelaythe OEMs’ possible intentionstoembedsecurehardware
intotheirdevices(unlessmandatedtodoso).
Logistics+ SupplyChainisone area where we see some upsideresultingfromCovid-19. Withmore
emphasisoncontinuationanddemandformore efficientandsecure operations,includingtrackand
trace and monitoringcapabilitiesgeneratingdataforanalytics,P.A.IDStrategiesexpectsnexttono –
or evena positive –impactduringandafter the pandemic. Nodoubtthatthere will be some holes
as companiesmovedquicklytoensure supplychainsweremaintainedwithfocusswitchingbetween
industriesandsectorsbutthe greaterneedformore automationandvisibilitywithlessreliance on
humanresourcesandmore remote access/supervisionisleadingustoup our forecastsfor
authenticationICs,eSIM(andSIM/M2Mmodulesinthe short-term) andcouldresultinfaster
adoptionof iSIMsolutionstoo.
To summarisethecombined effectof all of these factors,in addition to the above,P.A.IDStrategiesis
provisionally adjusting its2020 forecastforthe following hardwaresolutions:
• Authentication ICs: -15%(an increase in supply chain and logistics and IoTedge device/node
adoption isnot expected to offsettheexpected decline in consumerand objectID)
• HSM: -15-20% (Note:themajority of these are HSM-on-chip asopposed to rack-mountHSMs
which will fare betterdue to increased demand securing cloud platformsand services)
• Secure Microprocessors:up to -5% (minimalimpact on the computing/processing
applicationswhich they are primarily employed in)

10. • TEE: -10% (heavily impacted by falling smartphonesalesalong with automotiveand
consumer)
• TPM: -5-10% (combined effectof theeconomicdownturn affecting automotive,industrial
and computing
If greatereconomicbenefitfromthe adoptionof embeddedsecure solutionscanbe realisedby
service providersandend-usersthenthiswill be apositivefactorthatmay offsetsome of the impact
of Covid-19andthe subsequenteconomicdownturn. andthe increasedscrutinyandactivityaround
cybersecurity,privacyanddatasecuritywill continue tomove some tointegrate new embedded
securitybutit mayalsobe that theywill lookto(lower-cost) software inaninitial attempttoaddress
these matters.
Note
P.A.IDStrategiesishere tohelpourclients make betterinformedbusinessdecisions. We will shortly
be providingamore detailedupdate inits Marketintelligence Service:Digital Secure Solutionsfor
Credentials,Embedded+IoT Devices,addressing10 chipsolutions,5majorsmart card marketswith
relateddevices,plus7leadingIoTandM2M sectors. Our previousinfographicpresentingfindings
and summarisingthe MarketIntelligence Service’scoverage canbe downloaded here. Please
contact us if youwishto participate inreturnfora summaryof findingsorwouldlike tofindout
more about ourservices. ThisImpactReportand itscontentare copyrightof P.A.IDStrategies,
publishedinMay2020. Anyredistributionorreproductionof partor all of the contentsinany form
isprohibitedwithoutpriorwrittenagreementfromP.A.IDStrategies. Whileeveryeffortismade by
P.A.IDStrategiestoprovide anaccurate assessmentandresearchanalysis,innoeventwill the
companyor its employeesbe liable forinformation,analysisorrecommendationsprovidedor
actionsor decisionstakenbased uponthis.