Having My Doubts about NFC in iPhone 5

Near Field Communication, or NFC, is a set of short-range wireless technologies, typically requiring a distance of 4 cm or less.  Huh?

NFC is what all the cool kids are talking about.  It is a technology that allows a device, usually a mobile phone, to collect data from another device or NFC tag at close range.  It is most often associated with the concept of an electronic wallet where purchases are made by waving a mobile phone near a payment terminal.  However, there are many other potential applications.  Business Insider has a great article discussing several of those (Mobile Chips Will Change Everything).

As a trader I am always thinking of ways of converting interesting ideas into money in my pocket.  I have blogged several times about the companies in this space (Semis Waiting on a iPhone Tear-Down to Rip).  NXP Semiconductor continues to be one of the purest plays.  Unfortunately, NXP has become attached to the daily iPhone 5 on-again/off-again NFC rumors.  Obviously inclusion in the iPhone 5 would be a huge revenue booster and stock mover.  However, the more I read about NFC the less convinced I am that it will be included in the iPhone 5.

In early March, point of sale hardware specialist Verifone confirmed that it will be integrating NFC support into all of its new terminals.  Shortly afterwards Google announced plans to test NFC payments with Verifone. Google stated that it would pay to have thousands of cash registers from Verifone Systems installed at various businesses (Bloomberg).  I would imagine a test of this magnitude would take months; 3-4 at a minimum.

By the way, Google has a publicly announced NFC partnership with NXP.  I would have thought that after the Verifone / Google announcement an analyst would have linked NXP to Verifone.  Unfortunately, I haven’t seen one report linking the companies.  This could be significant new revenue for NXP.

Obviously, Apple hasn’t announced anything NFC related.  I would think that they would want to do similar testing as Google.  They could very easily test the technology in their Apple Stores.  However, I would think that they would want varied environments.

Taking all of this into consideration, having this technology integrated for a Summer iPhone release seems like a reach.  That being said, maybe mobile payments aren’t the most interesting application to Apple.  Apple is not one to do the obvious. I guess we will find out in June.

Disclosure: Long Apple & NXP Semiconductor in my 8 Ballers of Mobile portfolio.

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  • Anonymous

    i agree with your analysis here- seems a bit early for iPhone 5 to have NFC chip, with no compelling use case yet. GPS chip, Wi-fi, Bluetooth- they all had obvious immediate uses before included in devices. AAPL, contrary to public opinion, is not usually a big tech leader on these type of things- look at Blu-Ray, even CD-RW drives they were very late to the party.

  • I hear you and obviously agree. However, this is where Apple’s one hardware release per year becomes a problem. This appears to be a technology that needs to be tested in a wide variety of environments. IMO, they should include a NFC chip in iPhone 5 & limit its use to a couple basic applications. Then over the course of the year turn on additional functions thru software upgrades.

  • MarkHal

    Head and shoulders…