Lower NFC Phone Shipments Show NXP and Google Got Carried Away

The slashing by Netherlands-based chip maker NXP Semiconductors of its NFC phone forecast for 2011 demonstrates just how complex the business case for NFC rollouts can be.

NXP had counted on handset makers to order many more chips than they actually did during the second quarter. As a result, NXP cut its forecast for 2011 to 40 million phones or fewer for all of 2011, down from 70 million.

If handset makers do, in fact, ship 40 million phones–and some analysts have their doubts the total will even hit that level–it would represent fewer than 3% of total mobile phones projected to be shipped worldwide this year.

Handset makers, obviously, have yet to make NFC a default feature, waiting for orders from mobile operators. For their part, telcos, some of which have announced rollouts for this year, still are ordering selectively, as they firm up their business cases to pay for the extra cost of NFC phones, NFC-enabled SIMs and the system to deliver and manage the applications. They also know the infrastructure of acceptance points for most applications, such as payment, is sparse in most places.

Then there is the testing of phones, especially to make sure they work at the application level for payment and ticketing. The phones must communicate consistently with the legacy base of contactless point-of-sale terminals and transit terminals. That is no easy task given the expected variety of NFC phones and antenna configurations. At least some of the first commercial NFC phones, such as the Samsung S5230, have required much more testing and tweaking than expected.

Apparently NXP CEO Richard Clemmer & Co. got caught up in the Gingerbread fever a little too much. Clemmer was suggesting NFC phone shipments could approach 100 million units in May, at least one month into the second quarter. He based that on rosy projections from Google for NFC phones supporting the latest version of the search giant’s mobile operating system, Android, dubbed Gingerbread, which supports NFC.

Google, however, has been a little too exuberant itself in its projections for rollout of NFC-based mobile commerce–with Google’s executive chairman, Eric Schmidt, suggesting in late June that one third of U.S. point-of-sale terminals would accept contactless payment within a year. That was only an “educated guess,” he added, though one bordering on the absurd, since only about 2% to 3% of POS terminals stateside support contactless payment, at present, and Schmidt said Google isn’t prepared to subsidize nationwide terminals rollouts. For that projection to come true, it would mean merchants would need to roll out 2 million to 3 million terminals in one year.

Clemmer in May did preface his suggestion that phone shipments could hit 100 million by saying that there would be a lot of “variability” in NFC phone shipments through the year, and that the year-end total could come in as low as 40 million to 45 million. But he added: “We believe there will be a significant ramp of new programs during the latter part of the year as NFC breaks out into the mainstream smartphone market.”

The chip maker’s new projection of 40 million or fewer NFC phones for 2011, however, is even slightly below the low end of the range of NXP’s earlier estimate.

More High-Profile Handsets
If NFC does break into the mainstream smartphone market this year, it will only be on 10 or 12 handsets that major operators rolling out NFC will have in their shops by the end of the year.

As it looks now, this will include at least a few high-end models, including the NFC version of the Galaxy S II, a spokeswoman for Samsung Mobile UK confirmed to NFC Times last week.

In addition, Google is expected to follow its Nexus S 4G NFC phone with a model known as the Nexus Prime, the third edition of Google's Nexus series. Like the Nexus S, the new model is expected to be made by Samsung. The phone would sport an embedded chip to support the Google Wallet. The phone could be out by Christmas.

In addition, Nokia is finally shipping its Symbian-based C7 with the updated Symbian operating system, Anna, which turns on the functionality of the NFC chip, the handset maker has told NFC Times. Nokia still hasn’t made the over-the-air update of Anna available for existing owners of the C7, but that should happen within coming weeks. Nokia first began shipping the C7 with the chip inside last fall. The Finnish handset maker also is expected to introduce its N9 smartphone, based on the MeeGo platform, in the fall. Neither the C7 nor the N9 is likely to support payment on a secure element.

Nokia may ship another couple of Symbian-enabled phone models by the end of 2011. But NFC Times has learned the phone maker’s first Windows phones, expected before the end of the year, will not support NFC. The maiden NFC-enabled Windows Phone from Nokia, likely supporting the next version of Microsoft’s mobile operating system, Windows Phone 8, will come out in 2012.

Meanwhile, Research in Motion said it will release its first NFC-enabled BlackBerry smartphones, the 9900 and probably its close relative, the 9930, by the end of August. There probably will be two more NFC-enabled BlackBerry models by the end of the year, I’m told.

In addition, at least one Android phone from LG Electronics, the Optimus Net, will come out soon. Android models are possible, as well, from HTC, Sony Ericsson and ZTE, though not many of them. But the next iPhone is not expected to support NFC.

These new smartphones add to the few models that are already out, such as the Samsung Wave 578, based on Samsung’s bada smartphone operating system. There is also a handful of NFC-enabled feature phones, such as the Samsung S5260P, follow-up to the Samsung S5230; and an LG phone, the T530. Both are 2G handsets.

Clemmer is quick to point out that the opportunity is “just as significant as we had said,” but is only delayed by one to two quarters. Still, Clemmer also said the chip maker’s earlier projection of about 150 million NFC phones for 2012 would be lower, though would be a substantial increase over 2011.

The phones are in the pipeline, assured Clemmer, telling analysts that handset makers have 60 to 62 handset models under development with NXP chips.

It just remains to be seen how many of these models phone makers are planning to release–and when.

HEADLINE NEWS

Apple Pay Finally Enables Transit Ticketing in Beijing and Shanghai, but It May be Too Late to Turn Back QR Code-Based Wallets

NFC TIMES Exclusive Insight – After being beaten by rival handset makers Huawei, Xiaomi and even Samsung to the launch of NFC transit ticketing in China, Apple today finally began enabling riders in two major cities, Beijing and Shanghai, to tap to pay fares using closed-loop transit ticketing cards.

China UnionPay Seeks to Bolster Use of Brand for Mobile Payments Overseas; Will It Make a Difference?

NFC TIMES Exclusive Insight – China’s dominant bank card network, UnionPay, which is badly losing its battle for mobile payments market share among Chinese consumers to rivals Ant Financial and Tencent Holdings–both at home and abroad–is taking steps to try to gain some ground.

Japan Begins Overdue Move to Standard NFC Acceptance

NFC TIMES Exclusive Insight – Japan was the first country to roll out contactless-mobile payments–starting in 2004–but it still does not accept standard, internationally interoperable NFC payments to any real extent, unlike most developed markets.

Google Seeks to Sign Up More Merchants for Tez App in India as Competition Heats Up

Mar 21 2018

NFC TIMES Exclusive Insight – SINGAPORE: Google is seeking to sign up more small merchants and encourage more retail payments with its Tez mobile payments service in India, an app now mainly used for peer-to-peer funds transfers.

Apple Pay Could Get More Single-Tap Rewards in Next Few Months but Technology is Not Proving Easy to Roll Out

NFC TIMES Exclusive – Restaurant loyalty platform vendor Punchh could enable its delayed single-tap loyalty and rewards service with Apple Pay in the second quarter of this year at as many as six quick-service and fast-casual restaurant chains, the vendor told NFC Times.

Visa Sees Range of Use Cases for QR Code-Based Payments, as It Seeks to Address Threat from New Payments Players

NFC TIMES Exclusive – Visa, which last summer announced it would introduce QR code-based payments to Taiwan by the end of this year, has recently briefed Taiwanese bankers on the planned architecture, use cases and some other details of the technology, NFC Times has learned.

Russian Telco MegaFon Makes Play in Mobile Payments Market With Virtual Bank Cards

NFC TIMES Exclusive Insight – Russian telco MegaFon began issuing virtual Mastercard-branded bank cards yesterday, which its users can add to Apple Pay or Samsung Pay mobile wallets.

Google Gets Support for Its Underused Smart Tap Technology from POS Terminal Supplier Ingenico

NFC TIMES Exclusive Insight – Google has not yet given up on technology it bought from the now defunct Softcard joint venture more than three years ago to try to boost use of its rebranded NFC mobile wallet, Google Pay, formerly Android Pay.

Analysis: Google Launches Google Pay Rebrand, as It Seeks to Enable Payments Across Multiple Channels and Devices

NFC TIMES Exclusive Insight – Google began rolling out its previously-announced set of Google Pay services Tuesday in what is primarily a rebrand of Android Pay and other Google payments features. The initiative supports Google’s long-held goal of making payments seamless across its various products and access points.

Can Luxury Watchmaker TAG Heuer Sell Swiss Precision Along with NFC Payments? Its Latest Smartwatch Again Supports Android Pay

NFC TIMES Exclusive Insight – While payments wearables, in general, are taking off more slowly than expected, a number of manufacturers are incorporating the feature in their high-end watches and that includes Switzerland-based luxury watchmaker TAG Heuer.

Hong Kong Banking Group JETCO–Former Backer of NFC–Launches QR Code Payments Service

NFC TIMES Exclusive Insight – Hong Kong ATM and interbank group JETCO is the latest provider to launch a QR code-based payments service for in-store transactions in Asia, with payments coming out of the consumers’ bank accounts. But the group has few if any merchants live yet.

Vendor Hopes to ‘Flip’ Bitcoin Holders into Users of Cryptocurrency for Retail Purchases

NFC TIMES Exclusive Insight – While Bitcoin and other cryptocurrencies are mainly seen as assets for speculative investments these days rather than currencies for making payments, U.S.-based provisioning and mobile wallet platform company Fit Pay Thursday released a second announcement about its planned contactless device that would enable holders of Bitcoin to make purchases at brick-and-mortar stores.