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France-based NFC chip supplier Inside Secure has relaunched its initial public offering, planning to raise up the €79 million (US$103.4 million), as it seeks to stay competitive in an increasingly crowded NFC market.

The chip vendor had cancelled its planned IPO seven months ago, citing the European debt crisis, but relaunched the offering today, as it seeks to build on its advantage as one of the first chip suppliers to the NFC market. It also hopes to keep its technology ahead of much larger chip makers planning to enter the market.

“We want to finance the growth and R&D and increase our balance sheet,” Rémy de Tonnac, CEO of Inside Secure, told NFC Times at a press event in Paris this morning. “Samsung, Nokia, RIM, they want to see a strong balance sheet. (And) we want to get the recognition of being public. That has always been our target.”

De Tonnac, however, declined to reveal more about Inside’s customer win with a leading smartphone maker on a major mobile platform. The France-based chip vendor disclosed the win with an unidentified customer in a press release yesterday, as it tries to build market interest in its offering, which will amount to 32.9% of its share capital. The chip maker will list on the NYSE Euronext Paris exchange.

Inside yesterday also revealed it had shipped 20 million NFC chips for the 12 months ending in January 2012, including 10 million during the last three months.

Nearly all of the chips went to RIM for at least seven NFC-enabled BlackBerry models. But given RIM’s fading importance in the smartphone market, yesterday’s announcement mentioning the design win on another major platform was seen as a way for Inside to demonstrate that it will not be dependent on BlackBerry shipments. The unnamed smartphone maker will use either the Windows Phone or Android platform.

Inside earlier announced it supplies chips to Sonim Technologies, the maker of rugged work phones, which introduced its first NFC model in September. Chinese handset maker ZTE will also use Inside’s NFC chips, though it is unclear when or on which mobile operating system these phones will ship.

Inside Claims Parity with NXP
A fabless semiconductor supplier, Inside competes head-to-head with Netherlands-based NXP Semiconductors in the NFC market. NXP was believed to be the sole supplier in 2011 of NFC chips to Samsung Electronics and other Android handset makers, as well as to Nokia for Symbian NFC phones.

But Inside contends that with its contract with RIM, it achieved parity with NXP in NFC chip unit shipments last year, with 17.5 million NFC chips shipped during calendar year 2011. For total market size, Inside is relying on an estimate by UK-based IMS Research that handset makers shipped a combined 35 million NFC phones last year. NXP was not immediately available for comment on Inside’s market-share estimate.

Inside said it would use the extra revenue and exposure from the public offering to advance its growth strategy for the NFC mobile market, along with building business in the payment and ID markets.

Besides seeking to expand the base of handset makers buying its NFC chips, Inside plans to produce its own embedded secure element by the end of 2012, which would be stacked with its NFC chips. Inside to date has used embedded secure chips from Germany-Infineon Technologies in about 95% of the NFC chips it sells. But de Tonnac told NFC Times that Inside would continue to use Infineon secure elements with some of its NFC chips, including a 1-megabyte embedded chip Infineon has been developing.

Key for Inside to grow in the NFC market will be cracking NXP’s dominance on supplying chips for Android NFC smartphones and tablets, while gaining share in the coming market for NFC-enabled smartphones and other devices based on Windows Phone 8, expected to be released later this year.

“Android is open source,” de Tonnac said. “We are ready with our software stack with Android and Windows. It is only natural we will get into those platforms. We have advanced discussions in that direction with both of them.”

Inside said it would also seek to commercialize a SIM card with an embedded antenna it has developed that it claims can give non-NFC phones a contactless interface for card payment or ticketing. It has applied the technology to microSD cards, as well.

And the company said it would try to “capitalize” on a five-year licensing agreement with U.S.-based Intel Corp. to provide the giant chip maker with NFC technology for Intel’s combo wireless chipsets targeted at PCs and also mobile phones.

Inside also plans to try to capture business in such expected growth markets as EMV dual-interface and contact chips in the United States after 2013 and anti-counterfeiting and machine-to-machine technology.

Growing Share of Sales in NFC
In financial figures Inside released today, the vendor said its NFC business accounted for US$46.9 million of sales in 2011, or 31% of Inside’s total revenue for the year of $151.5 million.

That share of sales for NFC chips is growing while its contactless chip business for banking cards that once dominated Inside’s income statement is shrinking.

NFC chips and related revenue accounted for 52% of total sales during the fourth quarter 2011, or $23.2 million. Inside shipped around 8 million NFC chips during the quarter, though the vendor didn’t release an actual figure on Q4 unit shipments.

The NFC revenue is a big change from a year earlier, Q4 of 2010, during which Inside brought in just $1.5 million from its NFC business, or 4% of total sales.

Inside also produces chips for banking and ID cards, among other products and had the commanding share of the market for contactless chips in U.S. banking cards. But sales fell in 2011 for Inside's secure payment segment. In the fourth quarter, sales were only US$6.7 million, down from $21.1 million in the same quarter in 2010. The vendor hopes to capitalize on the move to EMV over the next few years in the United States and to more dual-interface banking chip cards in Europe and Asia and eventually in the United States.

All told, the year-end 2011 sales of $151.5 million was more than double the $78.1 million in revenue Inside recorded in 2010, but 2011 sales included full-year revenue from the Atmel smart card chip business, which Inside acquired in the fall of 2010.

Inside said it had a net loss of $11.3 million for the first nine months of 2011 alone, compared with a loss of nearly $8 million for all of 2010. The vendor blamed the higher losses on high research and development costs, which went mainly for NFC technology. R&D spending totaled $24.8 million or 22.5% of sales for the first nine months of 2011. The need to outsource secure elements to Infineon also hurt profitability, noted Inside.

The vendor, however, projected it would break even this year and would turn a profit in 2013, which would be its first since its founding in 1995.

That assumes that sales increase as projected. Inside is forecasting sales will jump to $400 million in 2014, based on a doubling of NFC phone and tablet shipments each year between 2011 and 2014.

Threat from Broadcom and Other Chip Makers
But Inside will see increasing competition from much larger chip makers vying for a share of this growing NFC market, including Samsung Semiconductor, STMicroelectronics, Renesas Electronics and Broadcom.

U.S.-based Broadcom, reportedly the largest supplier of Bluetooth and WiFi chips to smartphone makers, will introduce a standalone NFC chip this year and will combine NFC with its combo wireless chips later.

De Tonnac, when asked about the threat in particular from Broadcom, which claims it will have a chip that is much smaller and consumes less power than comparable chips from Inside and other semiconductor suppliers, noted that Inside still has a substantial head start in the technology.

“We are sure Broadcom is able to develop an NFC front-end,” he said. “Integrating that and making it work with the secure element, with the SIM card, and application processor in all cases when it’s presented in front of the reader (is another matter).”