is the same chip that is found in the credit cards used in much of the world outside the United States. It is the same chip that is carried by every soldier of the United States armed forces, and it is the same chip found in every satellite-television home equipment set. Since most hand-held devices contain a smart card, we thought that we could present computer evolution in action, and tell a smart card story, a good example of how computer history actually unfolds under evolutionary market pressures.

Odyssey

Smart cards were born in the 1970’s from concurrent French, German and Japanese development. Early patents in the area were also developed in the United States, but European efforts predominated. By the end of the 1970’s, a French journalist named Roland Moreno had accumulated a series of patents for placing microcircuits on a card, which would first take the shape and form of credit cards. He sold patent rights to two French-originated companies, Groupe Bull and Schlumberger, and this started the smart card industry. By the mid-1990’s, Bull had invented the microprocessor card (an invention of Michel Ugon), and the market established itself in the 1990’s along evolutionary lines of the first order.

The main card manufacturers were Bull CP8, De La Rue, Gemplus, Giesecke and Devrient, Philips, Oberthur, Orga and Schlumberger. The integrated circuit chips themselves were built by Motorola, Philips, Siemens and SGS Thomson. Philips deserves a special mention as in the mid-1990’s they tried to get into the smart card manufacturing business, only to abandon the effort later in a good example of evolutionary struggle. Later on, Motorola tried a similar move and ended up divesting both their smart card chip business and their smart card business. The lines of responsibility were drawn; meaning a workable food chain was established. Chip manufacturers designed and manufactured integrated circuit chips while card manufacturers merged the card and chip, installed operating system and application software and personalized the cards for mass usage. To adopt language from later in the book, the card manufacturers provisioned the smart cards.

The fact that there were no dominant players either among the chip manufacturers or the card manufacturers was not due to chance. Card manufacturers had been kept in check by French governmental direction, which allowed Gemplus to emerge as a competitor to first-dominant Schlumberger by giving them a forced part of the phone card market share. We’ll recount this particular episode in Chapter 6. In any case, this created a second sourcing culture in the smart card business which, to this day, dictates that most card buyers insist on respecting standards that allow them to obtain second sources for their card supplies. In turn, card manufacturers made sure that their own source of chip supply would be diversified by creating a competitive culture among the chip manufacturers.

However, in the mid-1990’s, the smart card business was ready for a mutational event. Every card manufacturer had a well diversified line of products with all imaginable combinations of operating systems. However, by that time Intel and Microsoft had become the dominant players in personal computers, and most advanced thinkers in the respective segments of the computer business wanted to become Intel, for the chip manufacturers, or Microsoft, for the software makers. The smart card domain, something of a backwater of the computer world, was no exception. Research teams had been created in all participating companies to that effect. One such research team was Schlumberger’s Austin team.

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