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NFC Payments and Semi Growth: A collaborative opportunity for services and OEMs


With the competition continuing to heat up in the tablet PC and smartphone sector, the latest feature set to enter the scene will be near field communication (NFC) technology to enable payments via smart wireless devices (SWD) and retailers.  The broader idea is not foreign to consumers, the targeted market for NFC-enabled devices, as they have become accustomed to key fob payment, wireless fob operations (door opening, car start, etc.), and loyalty card plans, to name a few common applications.

NFC payments go a bit farther though, with the SWD basically taking the place of a credit card in a transaction situation.  This payment capability requires additional hardware by both the retailer and the purchaser.  On the retailer's side, what we today would categorize as 'the scanning or swiping device' (the initiator) must be capable of receiving the secured information from the purchaser's SWD (the target).  On the purchaser's side, the SWD must have the appropriate RF-chipset to communicate securely with the initiator.  There is generally a 4cm proximity range for the devices to interact and create the near field communication RF field.  The closed RF field requires significant encryption and software plus hardware interaction to ensure a secure and successful transaction.

While there are many exciting opportunities that NFC payments will likely bring forth, the boom to SWD sales is self-evident.  Not only will the wide-scale introduction and forecasted adoption of NFC payment options re-invigorate already good smartphone sales, it will also support the initiator device market to be purchased by the retailers, as well as the back-end data storage and networking hardware that are necessary to handle the amount and type of data that must be handled.  IHS iSuppli estimates here that NFC payment technology "will [help] global shipments of handsets […] rise to nearly 550 million units by 2015."

New platforms such as 'Google Wallet' and 'Google Offers' are already debuting beta rumors to provide NFC interactivity (see this recent discussion in The Wall Street Journal).  These platforms involve the coordination of major credit cards, major service providers, and leading electronics OEMs, who have strategically increased the network of joint venture partners from telecommunication carriers to major retailers in order to create a solid, NFC 'ecosystem' that will best support consumers' purchasing patterns globally (see here from Financial Times, here and here from Bloomberg, here for the OEM perspective from iSuppli, and here from CNET, to name a few current discussions).

According to the IHS iSuppli research, the impact of NFC payments on the wider electronics supply chain is significant:

"Shipments then will rise to 544.7 million in 2015. This means that 30.5 percent of all cell phones shipped in 2015 will have the capability to conduct mobile commerce using NFC technology.

"NFC promises to revolutionize the way consumers pay for goods and services by allowing them to use their cell phones to make purchases. With NFC, consumers can pay their bus fare, buy a plane ticket or make an ATM/ credit card purchase simply by holding their cell phones near wireless terminals."

It looks as though this exciting, disruptive technology will provide substantive demand momentum across the industry, having positive impacts on components and devices alike, while increasing the pace at which business is moved to cloud-based services.

Lisa Ann Cairns, Ph.D.
Written on Tuesday, 14 June 2011 15:49 by Lisa Ann Cairns, Ph.D.

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