ISMANING, GERMANY and FREMONT, CA, August 24, 2004–SCM Microsystems, Inc. (NASDAQ: SCMM, Prime Standard SMY) announced today that it has entered into a cooperative agreement with Integrated Circuit Group of Sharp Corporation for the development, sales and marketing of contactless smart card readers.

Under the agreement, SCM will further develop its contactless reader/writers to be compatible and interoperable with Sharp’s range of contact/contactless smart cards and components. For its part, Sharp will list certified SCM products on its Web site, and where it deems it appropriate based on its performance evaluations, Sharp will recommend SCM reader/writers as the preferred solution.

Integrated Circuit Group of Sharp Corporation offers a range of technologies for contactless smart cards that are particularly well suited for high memory and security sensitive applications like e-Passports or identity credentials.

“The leading nations of the world all in agreement that the next generation of passports will contain contactless technology, which will make this a very active sector for many years to come,” said Robert Schneider, chief executive officer of SCM Microsystems. “This global cooperation agreement with Sharp, a technology leader in contactless, strengthens the positions of both our companies’ to capitalize on this trend.”

The first SCM contactless smart card reader approved under the agreement is the SCR 331DI, a dual interface reader that reads and writes to both contactless and contact smart cards. The SCR331DI is a small, low profile device that provides full speed USB connectivity and is bus-powered. It is CCID and PC/SC compliant as well as Microsoft® Windows® Hardware Quality Labs (WHQL) certified, ensuring compatibility with all PCs and their Windows software.

The SCR331DI is based on SCM’s proprietary interface and proven STC II microcontroller that brings a common set of advanced smart card reader technology including onboard flash, enabling the reader to be upgraded after deployment; high speed communications; and support for ISO 14443 A and B contactless protocols, parts 1 thru 4.

SCM also offers an OEM version of the SCR331DI reader called the Dual Interface Module, optimized for organizations that want to incorporate contactless technology into their own designs for specialized terminals and devices. As contactless technology gains ground in e-Passport and identity credential applications worldwide, many different types of customized devices will need to add support for reading and writing contactless smart cards. The Dual Interface Module reduces time-to-market and development costs for equipment designers and system integrators by eliminating the need to add specialized expertise in-house, then develop and certify the core contactless technologies internally.

About SCM Microsystems

SCM Microsystems is a leading supplier of solutions that open the Digital World by enabling people to conveniently access digital content and services. The company markets and sells its smart card reader technology for network and physical access and conditional access modules for secure digital TV decryption to OEM customers in the government, financial, enterprise and broadcasting markets worldwide. Global headquarters are in Fremont, California, with European headquarters in Ismaning, Germany. For additional information, visit the SCM Microsystems web site at http://www.scmmicro.com.