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Although China's intelligent card (IC) market will continue to suffer in the wake of the infectious SARS disease, its growth will pick up in the coming several years as the country replaces its identification (ID) cards with ICs, according to experts.

During the China International Intelligent Card Conference, which was held late last week in Beijing, Han Yirong, general manager of the Semiconductor Department at domestic market research firm CCID Consulting Co Ltd - a co-organizer of the event - said: "Despite the slow growth of the market, this year will be a watershed for the industry."

At the moment, disposable ICs are mainly used to make phone calls or to travel on public transport.

According to forecasts, the number of ICs this year will only reach 397 million cards, down 3.8 percent from last year's 413 million cards.

The sales value is estimated to contract by about 5 percent to 3.2 billion yuan (US$386 million) from 3.44 billion yuan (US$415 million) in 2002.

Han attributed the decline mainly to the spread of the potentially fatal SARS (severe acute respiratory syndrome) disease, which was at its peak in April and May.

He said the epidemic led to a sharp drop in the number of people using ICs to make calls from public telephones and from taking public transport, greatly reducing the demand for the cards.

At the same time, some social security programmes were postponed due to the concentration of government budgets to fight SARS, so the procurement of the cards was also hampered for some residents.

However, Han believes the growth of the IC market will soon gain a huge momentum.

"The launch of a new identification card system next year will offer a golden opportunity for the industry," said the analyst with the Hong Kong-listed company, which is a subsidiary under the Ministry of Information Industry.

China will start replacing the plastic ID cards presently carried by its citizens aged over 16 with ICs from 2004. The process is expected to take four years to complete.

Han estimated that the replacement of the cards for 1 billion people will create a market worth 20 billion yuan (US$2.4 billion).

And a new banking card standard to be introduced in 2005 by the three leading international bank card organizations - Europay, MasterCard and Visa, which is referred to as the EMV standard - will require the replacement of the 500 million magnetic banking ICs that are presently used within China.

Although the IC demand from the telecom industry will slow down this year, the possible launch of a third generation mobile communication system will revitalize the market, Han predicted.