Gemplus chairman and founder Marc Lassus said the accord provided for technical cooperation with the aim of developing new products. The deal will not involve any exchange of shares or stakes and is not exclusive.
The pact, which also covers marketing and sales, combines the two companies strengths. Gemplus is the world's top card manufacturer and can put out up to 1.5 million cards a day; IBM is known for its experience in systems and software to handle processing of smart cards.
The nonexclusive deal is designed to promote multifunction smart cards. It will include complete solutions including card, readers, application software, and back-end infrastructure in an effort to move today's market for single-use cards to multifunction cards.
The industry expects 3 billion chip-encoded cards to be in circulation by the year 2000 serving the telecommunications, banking, airline, insurance, and health markets.
"The market will grow from a billion dollars currently to 20 billion toward the year 2000," Peter Sany, managing director of IBM's Smart Card Solutions division, told a news conference.
Privately held Gemplus is controlled by several French and international investors, including GE Capital.
Senior writer Tim Clark contributed to this report.