Global Hardware OTP Token Authentication Market Size, Forecast, and Trend Highlights Over 2025-2037
Hardware OTP Token Authentication Market size was valued at USD 764.4 million in 2024 and is poised to reach USD 6.9 billion by the end of 2037, expanding at a CAGR of 18.5% during the forecast period from 2025 to 2037. In 2025, the industry size of hardware OTP authentication is estimated at USD 883.9 million.
The hardware OTP token authentication market’s growth is impacted by a rise in demand for secure authentication methods. The market is spurred by regulations such as the General Data Protection Regulation (GDPR) and Federal Identity, Credential, and Access Management (FICAM), driving the demand for hardware OTP token authentication solutions. The market is characterized by a supply chain that is vertically integrated and spans multiple facets such as secure microcontroller fabrication, B2B distribution via identity management integrators, hardware token assembly, firmware development, and others. At the upstream level of the supply chain, specialized microcontrollers are used in hardware OTP tokens. Additionally, the regions leading in smart card fabrication are Taiwan, Germany, and South Korea. The table below highlights key trade figures impacting the upstream level of the supply chain:
|
Data Point |
Value / Insight |
|
Year-over-year (YoY) growth in U.S. imports of secure elements (2023) |
+15.0% |
|
Key demand sectors driving import growth |
Defense, Financial Services |
|
Midstream manufacturing locations |
Malaysia, Vietnam |
|
Reason for Southeast Asia's midstream dominance
|
Competitive labor costs, EMS cluster concentration |
|
Lead time on secure elements (Q1 2023)
|
Extended beyond 26 weeks |
At the downstream end of the supply chain, the hardware OTP token authentication deployment is associated with the investments in building a secure identity infrastructure. Recent trends highlight that agencies such as the U.S. Department of Homeland Security (DHS) have increased budget allocations for the federal credentialing systems, with figures in 2024 highlighting a 23% increase in federal IAM procurement programs, which included multi-factor hardware-based systems.
Additionally, the U.S. exports of security and authentication hardware reached over 400 million in 2023, signifying an increase from USD 370 million in 2022. The increase is a reflection of the surging adoption trends in the Middle East and APAC, where cybersecurity mandates have tightened. These trends also bode well for the future outlook of the hardware OTP authentication market by the end of 2037.
Hardware OTP Token Authentication Sector: Growth Drivers and Challenges
Growth Drivers
- Surge in remote workforce and cloud adoption: The rapid shift towards remote work has bolstered the hardware OTP authentication market’s growth curve and is estimated to continue to remain one of the key drivers of the sector’s expansion in the coming years. In 2023, Duo Security released a report, that highlighted that more than 75% of organizations worldwide had proactively implemented multi-factor authentication (MFA) across their workforce. The number increased from 60% of organizations in 2021, which highlights the escalating demand for hardware OTP authentication solutions. Additionally, the trend of rising demand is especially visible in North America and APAC.
- Rising vendor-specific compliance standards in smart card-based OTP systems: The adoption is accelerating due to an increase in industry-specific compliance protocols set by large enterprises and identity vendors. For instance, in 2024, two industry giants, Google and Microsoft, updated their enterprise authentication frameworks to either mandate or recommend FIDO2-compliant hardware tokens in zero-trust environments. The table below highlights the driving forces behind compliance protocols and how they impact OTP hardware demand.
|
Driver |
Entity/Standard |
Year |
Key Statistic / Requirement |
Impact on Hardware OTP Market |
|
Enterprise Framework Mandate |
Microsoft & Google |
2024 |
Updated policies recommending or requiring FIDO2-compliant hardware tokens for privileged access |
Accelerated enterprise demand for smart cards and USB-based OTP tokens |
|
Standards Compliance |
NIST SP 800-63-3 (U.S. Govt.) |
Updated guidance ongoing since 2022 |
Recommends hardware-based cryptographic authenticators at AAL3 level |
Pushes OEMs to meet stringent compliance in product design |
|
Authentication Adoption Trend |
FIDO Alliance Adoption Report |
2024 |
60% of enterprise deployments include at least one hardware-based factor (up from 35% in 2022) |
Demonstrates a sharp rise in compliance-driven hardware OTP adoption |
|
Zero-Trust Security Architecture |
Identity Vendors / Cloud Providers |
2024 |
Shift toward hardware tokens for zero-trust privileged access |
Expanding the use case for OTP tokens beyond traditional MFA |
Cybersecurity Threats and Mandates in the Global Hardware OTP Token Authentication Market
A major supporting factor in the expansion of the hardware OTP token market is the increase in cyberattacks worldwide. Regulatory measures such as the U.S. Executive Order 14028 and CISA’s Zero Trust Maturity Model mandate have ensured the push for stronger identity assurance through FIPS 140-2 certified hardware tokens. Additionally, in 2024, NIST released a report citing OTP tokens' ability to bring about an 85% reduction in phishing attempts. This creates opportunities for companies to invest in token-based systems to curtail any downtime related to cyber breaches. The table below highlights notable cybersecurity incidents plaguing the market's key players.
|
Company |
Cyber Attack |
Impact |
Potential Remedies to Mitigate the Impact |
|
Colonial Pipeline (U.S.) |
Ransomware (2023) |
$4.0 million ransom paid; operational halt for 7 days affecting supply chains |
Deployment of hardware tokens for admin-level access and secure remote logins |
|
SolarWinds |
Supply Chain Breach (2023) |
Widespread downstream access risk; loss of federal contracts |
Integration of hardware OTP tokens in the software development pipeline |
|
Healthcare Org (EU) |
Phishing + MFA Fatigue (2024) |
Credential theft, unauthorized access to patient data (GDPR violation) |
Transition from SMS-based MFA to FIPS 140-2 compliant hardware tokens |
|
DoD Contractor |
Credential Stuffing (2023) |
Classified systems exposed; contract suspension |
Enforced token-based login and AI-based anomaly detection systems |
Challenges
- High total cost of ownership (TCO) for large-scale deployments: Despite their benefits, hardware OTP tokens tend to be associated with considerable costs in comparison to software-based authentication solutions. In 2024, the U.S. General Services Administration (GSA) released a procurement study; it contained insights that the overall lifecycle management of each hardware token can cost more than USD 115 per user. The findings indicate high cost and can impair accessibility to SMEs. Additionally, industries in price-sensitive sectors and regions can be reticent in adopting these solutions due to their high price.
- Supply chain vulnerabilities in secure element manufacturing: The ongoing geopolitical strife has impacted the supply of secure microcontrollers.
The global semiconductor shortage and geopolitical tensions continue to disrupt the supply of secure microcontrollers, critical components used in OTP token fabrication. Data from the U.S. Department of Commerce (2024) indicates that lead times for FIPS 140-2 compliant secure elements exceeded 28 weeks in Q1 2024, affecting delivery timelines for major token providers. Moreover, over 75% of secure element manufacturing is concentrated in Taiwan and South Korea, increasing dependency risks due to regional instability and logistics constraints. This has created bottlenecks in token availability, particularly for public sector tenders requiring certified hardware.
Hardware OTP Token Authentication Market: Key Insights
| Report Attribute | Details |
|---|---|
|
Base Year |
2024 |
|
Forecast Year |
2025-2037 |
|
CAGR |
18.5% |
|
Base Year Market Size (2024) |
USD 764.4 million |
|
Forecast Year Market Size (2037) |
USD 6.9 billion |
|
Regional Scope |
|
Hardware OTP Token Authentication Segmentation
Form Factor (USB Tokens, Smart Cards, Key Fobs, Mini Cards)
By 2037, USB tokens are projected to take the lead in the global hardware OTP Token authentication market, securing around 42.9% of total revenue. Their appeal lies in a strong track record of tamper resistance and reliability, especially in environments where high-assurance identity verification is non-negotiable. What gives USB tokens a distinct advantage is their compatibility with older systems and ease of deployment. Unlike smart cards or mobile-based solutions, they can be quickly rolled out in offline or air-gapped environments, where security and simplicity need to go hand in hand. The table below highlights regulatory support for USB tokens in Europe and North America, bolstering the growth potential.
|
Region |
Year |
Regulatory Body |
|
Affected Sectors |
|
United States
|
2024 |
U.S. Department of Homeland Security |
Approved USB-based tokens for FIPS 201-3 compliant identity systems |
Government, Enterprise |
|
France
|
2024 |
ANSSI (Cybersecurity Agency) |
Mandated USB-form-factor OTP tokens for secure remote authentication |
Defense, Energy |
Authentication Method (Time-Based OTP, Event-Based, Challenge-Response)
The TOTP, or time-based one-time passwords segment, is estimated to account for 39.5% of the market by 2037. This method has been around for a while and follows global standards like RFC 6238. NIST also backs it under their SP 800-63-3 guidelines. In 2023, they reported that using TOTP tokens in infrastructure settings led to fewer break-ins, leading to a 40.3% drop. TOTP is based on a simple principle, wherein the codes change every 30 to 60 seconds. The application potential is immense in places where security concerns remain high due to people logging in a lot, such as banks or utility systems. Additionally, with more companies leaning into zero trust setups, this approach is gaining popularity as it cuts down the window for attackers and does not rely on user memory.
Our in-depth analysis of the hardware OTP token authentication market includes the following segments:
|
Form Factor |
|
|
Authentication Method |
|
|
Application |
|
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Customize this ReportHardware OTP Token Authentication Industry - Regional Synopsis
North America Market Forecast
North America hardware OTP token authentication market is predicted to hold a leading revenue share of over 38.9% by the end of 2037. The region’s leading share can be attributed to how embedded these tokens are in government agencies, defense systems, and banking networks that run under strict regulations. Another key reason for this growth is the push for digital identity programs supported by the government. The U.S. Department of Homeland Security, for example, keeps investing in identity systems that follow FIPS 201-3 rules. These systems require hardware-based multi-factor authentication for federal employees and contractors, which keeps demand strong.
The U.S. hardware OTP token authentication market is predicted to expand its revenue share throughout the anticipated timeline. A key feature is that hardware tokens are being embedded into operations to boost cybersecurity. The regulatory mandates are pushing companies to tighten their cybersecurity vulnerabilities. In 2024, CISA stated that more infrastructure operators were using hardware MFA, with a 32% increase from 2023. A major driver of the increase is the push to keep ransomware in check. Additionally, the government has been proactive in pushing for Zero Trust setups, which is tied to Executive Order 14028. The order highlights that an additional security layer is necessary for verification via physical tokens, leading to high demand for hardware token OTP solutions.
Asia Pacific Market Forecast
APAC is poised to be the region exhibiting the fastest expansion, with a CAGR of 18.2% throughout the anticipated timeline. The regional market's growth curve is fueled by the rise of cybersecurity regulations across lucrative markets in Japan, South Korea, and Singapore. Another factor supporting the expansion is the expansion of digital banking, along with government e-identity programs. In terms of measurable regulatory support, the Digital Personal Data Protection Act of 2023 in India mandated the application of strong user authentication, prompting a surge in the adoption of hardware OTP solutions. Similarly, the My Number identity program in Japan has supported the greater use of hardware token-based identity confirmation.
The China hardware OTP token authentication market is expected to maintain its dominance throughout the forecast timeline. The market is backed by the digital finance ecosystem of China that emphasizes strict security standards. Additionally, the data localization laws of China, along with domestic tech firms integrating authentication hardware, bolster growth opportunities. In 2024, the Cyberspace Administration of China (CAC) announced revisions to its data protection frameworks. The rework has pushed for hardware-based user verification mechanisms, evident in the heightened deployment of USB tokens and smart cards under the aegis of e-government initiatives.
Major Players in the Hardware OTP Token Authentication Landscape
The global hardware OTP token authentication market is signified by the dominance of major security tech giants such as Thales Group, Yubico, and OneSpan. These firms are at the forefront of patent filings and the push for integration with cloud-based identity management systems. Additionally, manufacturers in APAC, such as Feitian Technologies, have capitalized on the rise of domestic cybersecurity mandates. To highlight recent acquisitions, in mid-2024, Authentix acquires Nanotech Security Corporation's authentication business assets to bolster currency authentication. The table below highlights the major players in the hardware OTP token authentication market and their revenue shares
|
Company Name |
Country of Origin |
Estimated Revenue Share (2024) |
|
Thales Group (Gemalto NV) |
France |
18.0% |
|
OneSpan Inc. |
United States |
14.1% |
|
Yubico AB |
Sweden |
10.3% |
|
Feitian Technologies Co., Ltd. |
China |
9.2% |
|
RSA Security LLC |
United States |
7.0% |
|
Token2 |
Switzerland |
XX% |
|
ActivIdentity (HID Global) |
United States |
XX% |
|
Watchdata Technologies |
Singapore |
XX% |
|
Microcosm Ltd. |
United Kingdom |
XX% |
|
SecuGen Corporation |
United States |
XX% |
|
Vasco Data Security |
United States |
XX% |
|
Micro Focus International plc |
United Kingdom |
XX% |
|
EnTrust Datacard |
United States |
XX% |
|
NITGen |
South Korea |
XX% |
|
IDPrime (IDEMIA) |
France |
XX% |
Companies Dominating the Hardware OTP Token Authentication Landscape
- Authenex Inc.
- Company Overview
- Business Strategy
- Key Product Offerings
- Financial Performance
- Key Performance Indicators
- Risk Analysis
- Recent Development
- Regional Presence
- SWOT Analysis
- Entrust Corporation
- Thales Group
- Microcosm Ltd.
- OneSpan
- SurePassID, Corp.
- Dell Inc.
- NortonLifeLock Inc.
- One Identity LLC.
In the News
- In March 2024, HID Global announced the release of the Expanded Crescendo 2300 Token Line. The solution is poised to provide expanded hardware OTP support to its Crescendio 2300 line. HID has cited a more than 20% growth in token shipment volumes within North America.
- In January 2024, Thales Group announced the launch of the SafeNet IDPrime FIDO Token. The new FIDO-certified hardware OTP token integrates both NFC and USB-C to ease authentication across multiple platforms. Thales targets the banking and government sectors as major end user for its solutions.
Author Credits: Abhishek Verma
- Report ID: 2905
- Published Date: May 21, 2025
- Report Format: PDF, PPT
