Apple gives NFC chip technology a prized seal of approval

Wed Sep 10, 2014 3:11am EDT
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By Noel Randewich

SAN FRANCISCO (Reuters) - Apple Inc's (AAPL.O: Quote) long-awaited launch of tap-to-pay technology in its new iPhones and smartwatch may be the seal of approval that near-field communication technology needs to become as commonplace as wifi, Bluetooth and GPS.

Called NFC, the technology lets smartphones communicate wirelessly with other devices such as point-of-sale terminals by holding them together. While proponents have argued for years that it is ideal for secure payment systems that could eventually replace credit cards, none have taken off.

At a gala event on Tuesday, Apple Chief Executive Officer Tim Cook uncorked Apple's attempt at mobile payments, called Apple Pay, using NFC chips built into the company's two new iPhones and Apple Watch.

NXP Semiconductors NV's (NXPI.O: Quote) dominates the market for NFC chips with Broadcom Corp BRCM.O accounting for much of the remainder. Chipmakers including Qualcomm (QCOM.O: Quote), MediaTek Inc (2454.TW: Quote) and Marvell Technology Group Ltd (MRVL.O: Quote) have their own NFC offerings and will have a chance to stake out more significant market share if Apple sets off an explosion in mobile payments.

Samsung, Motorola and other manufacturers already include NFC in many Android smartphones, and some mobile-payment inroads have been made in Asia. But with major payment systems like Google's Wallet failing to catch on, the technology has remained far from standard in handsets.

Now, trend-setter Apple's adoption of NFC looks likely to provide the technology the long-needed respect it needs.

"Apple not supporting it always called some people to question its viability,” said James Anderson, senior vice president of mobile and emerging payments at MasterCard (MA.N: Quote), which supports Apple Pay. "All those questions have gone away now. I expect NFC will be the predominant technology for point-of-sale payments between a smart device and a merchant terminal.”

Manufacturers included NFC chips in about 300 million smartphones last year, equivalent to around a third of all smartphones shipped. The number of NFC-enabled phones this year is expected to keep growing and reach around 550 million devices, helped by Apple's devices and an expanding number of Android gadgets, Gartner analyst Mark Hung estimates.   Continued...

Phil Schiller, Senior Vice President at Apple Inc., speaks about the iPhone 6 (L) and the iPhone 6 Plus during an Apple event at the Flint Center in Cupertino, California, September 9, 2014. REUTERS/Stephen Lam