ROUSSET, France — When Apple next month rolls out its new iPhones, whose NFC (near field communication) chip will be inside?

If it’s an STMicroelectronics chip, instead of the longstanding iPhone incumbent, NXP, this could be one of the biggest upsets since Trent Dilfer won the Super Bowl — with major implications for the industry. Right now, ST is keeping mum, not commenting on any specific design wins. Most analysts remain skeptical of the possibility, although some said it’s “conceivable.”

Look closely though. There are both external and internal factors playing into ST’s hand. In our recent interview with ST executives here, they made no secret of going after NXP in NFC, a market the Dutch chip supplier has ruled unchallenged for many years.

ST’s new confidence that it can be a viable competitor again in the NFC market is based on several factors.

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First, ST believes the NFC market is poised to expand because of Apple’s recent decision to allow developers coding for iOS 11 to create apps that can read NFC tags. Of course, Android phones have been doing this for several years with little success. But as Apple throws its weight into this field, ST and other industry observers are hopeful that Apple will spur the growth of NFC applications beyond payment.

Second, ST in the past several years has been quietly amassing — through acquisitions and licensing — key technologies that it says are boosting its NFC chips’ performance, both in reliability and distance.

Third, the elephant in the room is Qualcomm’s pending acquisition of NXP. When the European Commission decided to open an in-depth investigation into the proposed merger, it cited NXP’s leading position in the NFC/SE (secure elements) chip market and Qualcomm’s dominance in the baseband market as potential problems. If the two giants combine, the Commission is concerned that they “would have the ability and incentive to exclude their rival suppliers from these markets through practices such as bundling or tying.”

Fourth, there is also an ongoing legal spat between Qualcomm and Apple. This might open the opportunity for ST to replace NXP’s NFC chips inside Apple’s new iPhones.

Asked the question, ST made no comment. Many analysts to whom we talked don’t foresee such a vendor switch in the near future, although a few suggested that Apple might be leaning toward a non-Qualcomm solution.

So, let’s break it down, with focus on the changing NFC market landscape and specific solutions ST has up its sleeve in the NFC and secure element chip market.

World of opportunities

As Marie-France Florentin, ST’s microcontroller, memory and secure MCU group vice president, and general manager of the secure microcontroller division, tells us, ST sees “in NFC a world of opportunities.”

The NFC chip in a smartphone represents a colossal opportunity for any chip supplier. But once a smartphone becomes a reader of different NFC tags, it opens up to many different applications for NFC/RFID and secure element chips.

They can go into not just banking and identification, but can also serve as tags for toys, create “tapping” applications in various consumer goods, work like a magic in “pairing” for communications, and enable “secure provisioning” for IoT devices, ST explained.

Phil Sealy, principal analyst at ABI Research, told us, “Commercial and large-scale use cases for NFC outside of payments have been somewhat lackluster to date, but this is partially due to the limited market opportunity, which previously could only target Android devices.”

He blamed Apple’s previous decision “to lock down its NFC capabilities” for NFC tags’ slow market momentum thus far. “Service providers and brands are unwilling to invest in a technology that can only reach a limited number of users operating NFC-enabled Android devices.” Now, however, that could change.

The NFC tag applications listed by Sealy includes: social connectivity, targeted marketing, loyalty, smart posters, anti-counterfeiting, and brand protection. He predicts that NFC could become “the next-generation platform” for brands to reach out and connect with consumers outside of the traditional retail environment.

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NFC tag can be embedded on a vinyl record, offering liner notes (photo: EE Times)

Peter Cooney, principal analyst and director of SAR Insight & Consulting, remains skeptical. “The same applications have existed via Android. These have been limited so far,” he said.

John Devlin, founder and lead analyst of P.A.ID Strategies, is more optimistic. Citing such examples as smart posters (for more information and marketing material), maps (with directions) and exhibits (in a gallery or museum), Devlin said, “In my opinion, they provide a smoother experience and more digital solution,” compared with many applications that run via QR codes. The difference, however, is that they [NFC tags] cannot be recreated on a screen or printed as cheaply as a QR code, he noted.'

But let’s not forget the “significant opportunity” posed by NFC tags, said Sealy, as they offer convenient and seamless pairing of Bluetooth and other connected devices. The devices range from wireless headphones and speakers, to automotive infotainment systems. Sealy noted that certain Bluetooth chipsets are already available from vendors such as Nordic Semiconductor, which “include an on-chip NFC tag incorporated into the SoC for these, as well as other applications.”

NFC also has a role to play in the IoT world. Examples include “the secure provisioning of many headless IoT devices such as smart bulbs, motion sensors, and door locks that come without displays or buttons,” according to Sealy. NFC can help securely pair these devices to the access point, router, hub, or gateway device, he said.

ST’s NFC solutions

ST is no novice in the NFC/RFID market. It has been a player for more than a decade. Added ammunition for ST’s NFC chips are the IP, technologies, products and businesses ST has quietly acquired over several years to complement its secure microcontrollers and NFC/RFID solutions.

For example, ST licensed analog front-end IP from Melexis. It also closely worked with ams (Austria Mikro Systeme) for a few years prior to acquiring ams’ NFC and RFID assets last summer.

The result is ST’s latest NFC controller chips, announced earlier this year, featuring “booster technology,” explained Florentin. ST’s NFC controller chip, now equipped with “the best-in-class RF performance,” can outdo competing chips “in terms of distance and reliability,” she noted. More specifically, ST’s new generation of NFC chips provide “active load modulation for faster, smoother transactions over longer distances,” claimed ST. The result resulting is a better user experience in mobiles, wearables, or IoT devices.

Asked to provide benchmarked data on the chip’s performance, Florentin demurred. But she added, “Customers are finding our new NFC chips powerful, exceeding their expectations.”

ST’s improved NFC technology isn’t based just on the IPs and technology ST has bought, stressed Claude Dardanne, executive vice president, general manager of ST’s microcontrollers and digital ICs group. “It’s the engineering team at ams” which came to ST via the acquisition, he noted. Jim McGregor, principal analyst at Tirias Research, said, “One of the key things about NFC is that you can increase the range by increasing the power. However, that's not good for battery life on a mobile device. So, it really comes down to efficiency.”

That’s exactly what ST has done. ST said the reliability of an NFC chip can help reduce power burn. If the chip needs to go back every time a transmission fails, it ends up using more power.

Built-in power management and battery-voltage monitoring featured in ST’s new generation of NFC controller chips can “minimize any impact on runtime in a host-system such as a smartphone,” ST claimed. Further, it offers “extremely high RF sensitivity, which allows the use of miniaturized antennas; the option to use an external clock source instead of a crystal; and the high output power of the chip that makes the DC/DC booster optional.”

NFC + eSIM

The NFC market can be split into two categories – the NFC controller and the NFC embedded secure element. ABI Research’s Sealy said, “NXP is the leader in both markets, commanding a market share in excess of 50 percent within the NFC controller market and 70 percent within the embedded secure elements market.”

ST’s scalable NFC solutions include the NFC controller, a secure MCU, an embedded secure element (eSE) and embedded SIM (eSIM).

It’s worth noting that ST also offers system-in-package (SIP) NFC chips — ST54F and ST54H — that integrate NFC controller, eSIM with eFlash.

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Embedded SIM would be ideal for OEMs to design smaller & thinner mobile devices (i.e. smartwatch directly connected LTE network, for example). A combo chip — NFC controller, eSIM and flash — can offer a solution to smartphone OEMs who prefer to offer proprietary applications through their own payment service.

ABI Research’s Sealy agreed that such a solution with the combined functionality of eSIM “would certainly be of benefit, likely reducing the associated average selling price.” Needless to say, “Control has had a major part to play within the secure element piece of NFC,” he pointed out.

Noting that that’s exactly why Apple decided to go with the embedded secure element piece for its Apple Pay platform, he cautioned that “whether Apple takes the leap to the eSIM in handsets is another question, and one with multiple factors.” Most notably, there has been a lot of resistance from mobile network operators (MNOs) regarding eSIM inclusion into handsets.

Sealy pointed out, “There are strong rumors that Apple’s Series 3 watch will be LTE enabled. This could be conceived as a strong indication that Apple is following the lead of other OEMs, using the eSIM as a platform to allow additional revenue stream generation in newly connected devices.” He argued that devices including eSIMs typically have be selectively launched in certain regions, because “not all MNOs are ready.” Sealy concluded that it’s more likely that an OEM would adopt a dual SIM handset approach (both removable and eSIM options) to ensure continued global distribution.

NFC Tags

Being the world’s leading EEPROM memory supplier, ST offers a full range of NFC tags embedded with memories. In addition to its regular NFC tag, ST has been supplying “dynamic NFC tag” memories for several years.

ST’s dynamic NFC/RFID tag memories consist of three blocks: a non-volatile memory, which is an electronic memory that retains stored data even when its power supply is switched off; a wireless interface for communicating with other wireless devices; and a wired interface — I2C — for communicating with the controller of the host equipment.

Benoit Rodrigues, ST’s memory division general manager told us that NFC tags have been generating many “tapping” applications. Beyond NFC tags inside numerous objects, NFC can go into “Industry 4.0,” he explained. An NFC tag placed on a printer package at a manufacturing line could contain not only its own ID (where it was made), but can be used to change characters and languages tailored to its shipment destination, he said.

20170822_02_04 Benoit Rodrigues (Photo: EE Times)

Dynamic NFC tag memories attached to a consumer product are used for firmware updates, in-the-field diagnostics, adding new applications or changing parameters.

Competitive landscape

Despite NXP’s long dominance in NFC, a number of rivals have come into play. P.A. ID Strategies’ Devlin listed NXP, ST, Infineon, Broadcom and Samsung. SAR’s Cooney observed, “Previously, Broadcom provided NFC for Samsung's Galaxy phones, which made them a major supplier, but as NXP grew faster and Samsung made its own NFC chips, Broadcom lost share and NXP became dominant again.”

Cooney added, “It will be very interesting to see what happens after NXP becomes part of Qualcomm. Qualcomm’s usual drive towards integration of technologies into the Snapdragon platform could see a change in the way NFC is implemented (this doesn’t necessarily impact Apple but could have a major impact on the Android smartphones market).”

Indeed, the European Commission, in explaining its investigation into Qualcomm's proposed acquisition of NXP, explicitly noted, “The merged entity would have the ability and incentive to modify NXP's current intellectual property licensing practices, in particular in relation to NFC technology, including by bundling the acquired NFC intellectual property to Qualcomm's patent portfolio.”

The EC will investigate whether such conduct could lead to anticompetitive effects, such as higher royalties for customers and/or exclusion of competitors, it said.

That brings us back to the original question of this article: Will Apple replace NXP with ST for the NFC chip inside the new iPhone?

P.A. ID Strategies’ Devlin is doubtful. “NXP is fairly well entrenched in the design process over several iterations of iPhone and I would imagine that changing suppliers is not the easiest of tasks to manage as there will be subtle differences in read range, antenna performance and sensitivity, with the design and layout having been tailored over the years to suit the design and materials within a specific model.”

SAR’s Cooney maintains his doubts that any “spat” between Apple and Qualcomm would trigger a vendor switch. However, he speculates that Apple could use ST as a dual source for NXP’s NFC chip, much as it has done for other components such as microphones. “This keeps competition strong amongst suppliers.”

Tirias Research’ McGregor doesn’t believe that recent Apple-Qualcomm friction would trigger an Apple vendor switch. However, he noted, “When it comes to its suppliers, Apple has been known as a bully and Apple doesn't like it when someone stands up to it.”