As the U.S. market for smart cards expands, French companies are staking their claims here, and Solaic, a mass producer of chip cards, wants its share.

Following its French arch rivals Schlumberger and Gemplus, the card manufacturer is in the process of setting up a sales and marketing office in San Jose, Calif.

Solaic entered the U.S. market in 1994 through an exclusive distribution agreement with Direct Data Inc., a systems developer and hardware distributor.

Though the exclusive contract has expired, Solaic is maintaining its relationship with Direct Data, while adding two other distributors: Innovatron Data Systems Inc. in Los Angeles, and Intellicard Inc. in Boynton Beach, Fla.

"We bring them up to speed on how to sell our cards, train them on how to use the products and what markets they can go into, and authorize them to sell our cards," said Kurt Brunner, director of sales and marketing for Solaic in the United States.

Even so, Solaic has not taken the bold steps some of its European colleagues have by forming joint ventures for manufacturing here. Orga Card Systems Inc., a German card maker, recently partnered with Kirk Plastic Co. of Los Angeles for manufacturing smart cards; Schlumberger acquired Maryland-based Malco Plastics a few months ago; and Gemplus acquired the manufacturing arm of Minneapolis-based Data Card Corp.

"Clearly, Solaic has to do something over here," said Stephan Seidman, editor and publisher of Smart Card Monthly, a newsletter based in Washington State's San Juan Islands.

Mr. Seidman said Solaic's contract with Direct Data did not do enough in terms of promoting the company in the United States. "They're not well known." he said. "I haven't seen any mention in the press or any contracts won since that relationship was established."

However, Mr. Brunner said Solaic is "considering purchasing, or doing a merger with one of the card companies here. We are looking to establish ourselves both in the U.S. and South America," but there are "no deals on the table."

The company plans to expand its agent network over the next year or two, to go after the growing market, added Mr. Brunner.

Solaic considers itself the No. 3 producer of chip cards, behind Gemplus and Schlumberger. The Bull Group, another French chip card manufacturer, specializes in microprocessor cards, which are considered smarter than memory chip cards used for simple stored-value applications.

Solaic makes prepaid telephone cards with embedded chips for US West and will be one of several card providers for MasterCard International's Canberra, Australia, pilot in the fourth quarter of this year. It is producing a loyalty card for Estee Lauder, which will track a customer's purchases as well as recording cosmetic information. That program will be rolled out in selected areas in Canada next year, Solaic said.

With revenues of $82.5 million, Solaic produced 56 million chip cards in 1994, mostly memory cards for prepaid telephone functions and simple stored-value applications. The company projects it will produce more than 70 million cards for 1995. Solaic also manufactures magnetic stripe cards and operating software for smart cards and other card systems.

Parent Sligos, a French software company with locations throughout Europe, had revenues of $803 million in 1994.

Mr. Brunner said Solaic's U.S. role will be "to provide quality products to both the banking and memory card marketplace."

The company is a member of the Europay, Visa, MasterCard standards body. It works directly with Visa and MasterCard on specifications, with one of its engineers located at MasterCard's New York facilities. And it is a member of the Smart Card Forum, an industry association dedicated to promoting smart cards in the United States.

"When Visa and MasterCard decide to make chip cards a part of their offering, we will be certified to do that for them," said Mr. Brunner.

"Our overall philosophy is to locate strong system partners in specific markets, move at a gradual pace, and get that market started before moving on to another," he said.

"We want to establish a stream of products on the nonfinancial side as well as prepare for the products and services required for the financial industry."

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