Tsinghua Unigroup Core Enterprise
Stock Code: 002049
Tongfang Guoxin: to accelerate innovation upgrade and break the financial IC card chip localization
Post Time:2015-5-12 11:14

Standing in a strategic height of national security, the realization of national financial security, and promotion of financial IC card localization alternation are the trend of the times. The Ministry of Industry and Information Technology, the People's Bank of China, China Password Office, UnionPay and other departments have promoted chip localization in a financial field for more than three years, but the progress has been slow. Domestic financial IC card chip is in a certification test stage of small batch of commercial use. By the end of 2014, the localization chip utilization rate was less than 2% in domestic Banks.

On May 7, 2015, Tongfang Guoxin and Citic Bank held a signing ceremony, and officially released financial IC card chip bank co-branded card with Tongfang Guoxin independent research and development, which meant that the domestic financial IC card chip had broke through the small batch of commercial use certification test phase, with the large-scale commercial card into reality. As Zhu Jialin said, Citic Bank vice president and head of the sales department, the action conformed to the requirements of the independent and controllable state information security strategy as a case example, and would accelerate the use of domestic chip and GM algorithm.

The first step in struggling

At the beginning of 2015, China UnionPay released data and showed that, China's financial IC card quantity doubled on year-on-year basis in 2014, with the total of more than 1.2 billion copies. And financial IC card environment was also increasingly perfected, the ATM and POS machines could implement the financial IC card function. China had entered into the financial IC card migration.

Driven by government leading and vendor cooperation, domestic financial IC card chip with small batch delivery in 2014 were applied in financial industry mainly, such as residential health card with financial capability, and domestic chips use in bank are minimal. As Zhao Weijian said, the president in Tongfang Guowei, the bank card is the last thing hard to handle in the field of smart cards.

Duan Li said, the general manager of Beijing Tongfang Microelectronics Co., Ltd. "International attribute of the bank card is the root cause that domestic chips are hard to enter. And internationally accepted certification standard high threshold for domestic chips, and the international community technical barriers, price and other comprehensive factors make domestic banks use domestic IC chips in an underpowered way."

In order to speed up the popularization and application of domestic financial IC cards, our country actively carried out the independent financial IC card chip safety inspection work. In 2008, on the basis of contactless chip technology, Tongfang Microelectronics conducted financial level chip security technology research and accumulation. In 2011, it provided technical support and products for the financial security chip certification in China's bank card test center. And in 2012, Tongfang Microelectronics passed the double CPU interface card Unionpay card chip safety inspection.The following year, it obtained the secondary GM certificate. This symbolized our country had dual interface chip products for financial IC cards.

Core ability to break two problems

The support of government policy guidance, the domestic testing agency perfection, and the technology level ascension and domestic chip manufacturers bring new opportunities for domestic financial IC card promotion in the commercial banks.

However, with the listing domestic chips, chip manufacturers abroad rely on technology and cost advantage, reduce the chip price quickly, and trying to kill domestic chip market means in the cradle or slow the progress of the domestic chip to the market. Domestic chip has just been introduced, facing double competition of technology and price.

In the face of optimistic industry potential and non-optimistic market environment, Tongfang Guoxin has two firm ideas: one is to pass the certification, and the second is to continue to optimize cost.

Tongfang Guoxin is produced from national certificate II project, forming non-contact, multiple interface and high security chip core ability and technical advantages. In the application of the Citic Bank card project, THD86 series chip is the domestic first 32-bit CPU dual interface card chip, through the approval of UnionPay, National Center for Information Security Evaluation and GM, with support for financial applications, domestic and foreign password dual algorithm system. The chip has been used in resident health cards, bank cards, and other financial IC cards with production of more than ten million, as one double interface chip with the largest shipments of financial function.

Tongfang Guoxin, meanwhile, put into a large number of basic research and development work in 2014, launched a 110 nm chip THD88 with the most domestic cost advantages, in 2015, it was expected to get to the top rank of the international certification, so as to makes domestic chip go out. Based on 90 - nanometer chips applied in a research stage, the cost will be better than the current foreign chip in the future.

Zhao Weijian said: "as long as the market channel is opened, the domestic chip advantages on technology and cost will gradually emerge, which is fully proved in localized SIM cards."

Proactive qiao "enclosure"

Financial IC card domestic cryptographic algorithm application demonstration project obtained achievements since May 2013, led by the national development and reform commission with a commercial test card, in which national first PBOC3.0 GM multiple application financial IC card application project was conducted in Henan Hebi Bank, and Tongfang Guoxin offered chip products conforming to the specifications.

For accelaration in commercial process, the manufacturer should change ideas and should actively conduct, from the independent drive of small and medium-sized commercial Banks whose operating model is more flexible with more positive attitude, andtake the initiative to fight for his position.

After the Hebi project, Tongfang Guoxin successively cooperate with China Merchants Bank, Ping An Bank, Citic Bank, Bank of Beijing for co-branded cards. Duan Li says," the circulation use of bank cards has a very significant meaning. Card production process is the most complex among all the smart cards. Scale commercial use can verify domestic chip real effect in practical application, which makes the chip in the process of batch production and use receive stress test, to find problems. From the effect of using at present, our chip is stable, and has proved the reliability of domestic chip."

In 2015, Tongfang Microelectronics put forward the "Universal Bank", and everyone could go to expand the bank's business."China's bank number is up to three or four hundreds, we shouldn’t wait for the government to promote, and take the initiative to go to the market, with done work facing the financial IC card real commercial batch use in 2016."Duan Li said.

So far, more than 10 banks that realize the issuing or complete test, and the big state banks come into net test. The successful experience of commercial banks and local banks has an obvious role in promoting the state-owned large and medium-sized banks. Zhao Weijian said, as the process of maturity and improvement of the bank acceptance, this process will be accelerated in the second half of 2015.

Welcome to the future by cooperation and innovation

In accordance with related statistics, there are about 4 billion bank cards in the stock market. In the several years of future, the the number of financial IC cards newly issued will be hundreds of million. If we can’t make full use of the recent two or three years, the space for national chip is limited.

“For the domestic manufacturers engaged in chips, the most difficult is that we can’t break the high standard to enter this market. Once you make it, what is left is the competition of capacity. We are so confident about our ability,” said by Zhao Weijian, “for Tongfang, we have gotten the identification of Unionpay, the certification of international standard. The next step is that we shouldn’t be restricted to domestic market with 4 billion, and instead, our objective is to go outside to participate in global competition.”

In 2013, with Beijing Tongfang Micro-electronics Co., Ltd. As the main body, it has completed the merging and reorganization on the circuit design industry of the company, with the value of chips made in China accounting to RMB 30 billion. Depending on the advantages of capital and brand, Tongfang chips pay much more attention on the technical research of smart card chips and the upgrade and innovation of products, obtaining more extensive space for development.

The annual report shows that, in 2014, the shipment of the smart card chips of Tongfang increased 50% on year-on-year basis, among which its market share has been over 70% in the field of reader-writer of second-generation ID card. SIM chips have covered the global major card manufactures. In 2014, it sold about 1.1 billion, ranking second in global market. In the field of health card for residents, Tongfang has become the top one brand, with entering rate of more than 70% of the bidding projects in different provinces and cities in China. Besides, in the field of mobile payment, Tongfang has mature solutions that mobile payment terminal will be an important growth point in the future.

As for the business smart card chips, Tongfang chips has made three plans. The first is the second-generation ID card which is the core and foundation; the second is the accumulation and market development of related technologies and products about smart card; the third is to conduct product exploration aimed at the current three core techniques owned by Tongfang, that is multi interface, information safety and flushbonading FLASH. Duan Li said: “our purpose in the future is not to build product-oriented company, but company with core technology.”

Based on three core technologies and around financial safety and payment security, Tongfang is planing a new product form with relevant adjustment on organizational structure. Zhao Weijian highlights that: “in the past over then years, Tongfang has accumulated technologies, teams and market resources in the field of smart card chips. Our advantage is to combine advanced technologies with market trends in the future, so as to produce products with excellent potential from the perspective of meeting market’s demand. Some products can’t be imagined by us at present. However, when different kinds of conditions, for example, favorable climatic, geographical and human conditions, are available, there will be huge social and economic effects.

Tongfang Guoxin has three businesses: smart card chip, special integrated circuits, and crystal business. For the next expansion, Zhao Weijian suggested grasping the endogenous growth, namely with more money and resources into the three basic businesses, and focusing on extension acquisition, for more niche areas surrounding the IC design. He said, "In the future, we will no longer be completely relying on our own accumulation bit by bit, but introduce and go out on the basis of independent innovation, seeking the cooperation with other manufacturers, and hoping a faster step."

For Tongfang Guoxin, in the future, with the acceleration of the 4G promotion, 4G - SIM card shipment volume has great potential for growth. At the same time, the financial IC card, SWP - SIM card chip localization alternative prospects is extremely optimistic.

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