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NFC readies to crack market

Posted: 07 May 2008 ?? ?Print Version ?Bookmark and Share

Keywords:NFC? market takeoff? electronic payments?

A technology that has the potential to replace money is bound to excite interest. NFC is such a technology, but the security and software complexity as well as vested interests surrounding the hardware engineering have kept the technology from making its way into commercial applicationsuntil now.

According to delegates at an upbeat European NFC Developers Congress, the market could take off in 2009, while others have cautioned that 2010 is more realistic.

NFC has been coming for several years, awaiting standards blighted by conflicts of interest between mobile phone operators, the banking and payment-processing community, and handset and SIM card makers. The reason is straightforward: NFC is touted as a payment method, and at least two stakeholdersthe banks and the phone operatorshave each expected to be in control and been wary of others who want to be.

But last week's conference suggested that things are moving forward, provided chip manufacturers such as NXP, STMicroelectronics and Inside Contactless can produce enough chips to satisfy phone makers and others.

Growing interest
Last year's event attracted about 100 delegates, while last week 400 attendees registered for both technology and business tracks. And a design competition organized by the NFC Forum special interest group presented applications for NFC other than the oft-mentioned mobile payment, public transportation and ticketing.

"The numbers speak for themselves, as does the enthusiasm seen here, on the back of solid progress in standardization and successful field trials," Gerhard Romen, vice chairman of the Forum and head of NFC market development at Nokia, told EE Times. "NFC is a great technology, but it is sometimes hard work to make it all work together, kick it into shape, and prove just how easy it could be."

Romen said the Single Wire Protocol standard was finalized a few weeks ago and the definition of the Host Control Interface that sits within the management layers between the SIM platform and an applications processor is almost complete. "There are also phones under development in addition to the couple of models available from Nokia. So it is happening. Now we need the chips to be available in volumes," he said.

Heikki Huomo, general manager for the NFC segment at NXP, said his company is fully committed to the sector and has a huge stake in it. "Perhaps it is not finger-pointing time, but show us your orders," he retorted.

Huomo told EE Times: "The big players in the ecosystem will make the big push when they see a business case for themselves and the consumer. As for us, we are already the biggest supplier of chips for the NFC business, but in reality, it is not a huge business, even in the future. 100 million units at, say, $1 each and dropping is not that big a revenue earner. For us, it is an enabler into secured elements and services that's where the pot of gold lies, not just in the silicon itself."

A recent report on the sector from market research group ABI shows that penetration rates of NFC into mobile phones are set to rise exponentially, from about 3 million handsets out of 1.09 billion in 2008, to 34 million out of 1.15 billion in 2010 (a penetration rate of 3 percent) and increasing to 303 million NFC-enabled phones out of 1.4 billion phones shipped in 2012 (21 percent penetration).

Overhyped numbers
Huomo said he is looking forward to the "huge opportunity" for NXP and other chip suppliers. "The early numbers from some researchers were clearly over-optimistic and overhyped, but these ABI estimates are realistic," he said. "It could have been much better and we would be at a more advanced stage had it not been for some of this wrangling between operators and banks and things like sorting out the single-host, multihost debate."

Huomo said silicon now needs to be designed-in, certified, processed and delivered in volume and quality to the handset makers, but cautioned that "this will not happen till 2009."

On one aspect of the debate, Romen and Huomo are in agreement; that security, often seen as a barrier, is not such a big issue.

"This aspect has definitely been overplayed. About 80 percent of the applications we see for NFC do not need the tightest security aspect we have developed. It is a question of fit for purpose, and we should push ahead while the sectors that do demand really tight security, which includes the mobile payments [sector], develop at their pace," said Romen. Huomo concurred that many applications that use NFC's service discovery capability don't necessarily need great security, and "we need and now have a wide range of security elements." He said NXP is about to introduce Mifare Plus, an addition to the company's existing platforms for mobile integration that it has been offering for a decade.

The latest version will be targeted at automatic fare collection and access management applications that require relatively high security elements, and sits at about halfway between four existing offerings (Ultra Lite, Classic, DesFire and SMX).

The Classic, Plus and DesFire versions will also be offered as embedded secure elements in about 18-24 months. "We need to develop these as they mean modifications at chip level, changes to the operating system and Common Criteria certification," said Huomo.

He also revealed a more radical initiative for NXP's Mifare card platform: NXP is preparing a technology licensing program for the platform for NFC applications. This, again, will take some time to evolve as it involves both the Mifare hardware and the crucial over-the-air management protocols and interfaces with Mifare4Mobile.

"With this we are making a very clear statement that NXP wants an open industry specification in this area," said Huomo. "We are talking to several other chip manufacturers and have indicated that we would not be seeking tens of millions of dollars in fees, and the arrangement would also have a numbers-based element so as not to disadvantage smaller players."

Challenges ahead
While the mood at the European NFC Developers Congress was optimistic, a report that will be available on line this month from the EE Times Market Intelligence Unit cautions about the hurdles ahead.

"A true mobile payments market likely will not emerge until 2010," said Loring Wirbel, who heads up the market research effort. "If investment-bank conservatism spreads to the consumer banking community, this could postpone mobile payment NFC to the next decade."

One of the key gating items for this market is the development of "a broad ecosystem of card-reader subsystems, system-integration tools and dedicated application software," according to the report. That includes "support software and back-end billing services," which need to define models for handling secure transactions, Wirbel wrote.

The report notes that cell phone makers have been conservative about integrating NFC into handsets to date, given the number and complexity of radios handsets already support. In terms of silicon, "it is unlikely that more than three or four semiconductor players will be able to sustain a position in this market," Wirbel said.

Specifically, Wirbel called for chip makers STMicroelectronics and NXP to rationalize their NFC products in the wake of their recently announced plan to merge their wireless business units in a new company. "They should think seriously about developing a common architecture that takes a best-of-both-worlds approach," Wirbel said.

However, ST's Huomo offered few indications that this is being contemplated at this stage. "Both partners in the coming joint venture specifically excluded NFC activities from the initiative, and I am not aware of any discussions about joining forces. There are, of course, discussions amongst us about the potential of the technology, but that is normal in such a sector."

- John Walko
EE Times Europe

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