Numbers for embedded readers have not been broken out by firms such as Datamonitor. For his part, Gower says he plans to split embedded readers from plug-ins when he does his next report on the market.
PC manufacturers are reluctant to comment on the features they offer because of the fierce competition they face. But major companies do offer embedded readers. Taiwan-based Acer Group, for instance, has built readers into TravelMate laptops. Germany-based Fujistu-Siemens has readers as both standard and optional equipment on laptops and desktops. U.S.-based Hewlett-Packard has integrated readers on its nc4200 notebook PC.
Dell has put readers onto OptiPlex desktops, Precision workstations and Latitude notebooks as a standard feature.
Dell, which began offering readers as a standard feature in Latitude laptops in the spring 2003, is optimistic about the market, especially as the U.S government continues to develop common, large-scale smart card systems. A major factor in that growth is the directive signed by President George Bush in August that is expected to result in some 7 million U.S. government employees and contractors carrying a standard smart card ID within a few years.
"There's definitely potential," says Tim Gee, senior product planning manager for Dell's Latitude notebooks. "We do see security becoming" a greater issue. For now, that demand for security is coming from government and corporate clients, Gee says.
He says Dell computers with embedded readers have middleware and Trusted Platform Modules, which store passwords and digital certificates, providing extra security. Smart cards also store such digital credentials, but a card is portable, while a TPM is tied to a PC's motherboard and is designed to secure that machine.
Microsoft is a big backer of the tamper-resistant chips, which are attached to the motherboards of PCs, but not mainly to secure e-commerce. The chips can store cryptographic keys that help thwart hackers and software counterfeiters.
Smart card readers would seem to make particular sense for laptops, since they would allow traveling employees to log in with smart cards from the road. But one obstacle to wider use of embedded readers is the limited real-estate on laptops, especially as they have shrunk in recent years to gain mobility, say Jerome Denis, Axalto's project marketing manager for the Access product line.
Different applications, including cards used to connect the computer to networks, are competing for slots. Users can plug nonembedded readers into the slots or into USB ports. Nonembedded readers that fit into USB ports cost about $10 to $15 each when bought in bulk. Readers that slide into the PCMCIA slot, typically used for sound, memory and other cards, can cost twice as much.
Denis is optimistic that more enterprises will buy embedded readers as part of periodic hardware upgrades. So far, though, the market hasn't caught fire. "Despite the integration of readers into hardware, we've seen our revenue pretty much flat for readers," he says, declining to offer figures.
Beyond enterprise users, few observers report much consumer demand for embedded readers on PCs. That could change if banks start requiring consumers to use smart cards for Web site authentication. But some European banks that are rolling out smart cards are passing on smart card readers that plug into PCs and instead distributing small handheld readers that can generate a one-time password when the consumer inserts a chip card.