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Germany-based chip maker Infineon Technologies has no plans to join its rivals in producing NFC chips–instead focusing on secure elements that can store payment and other applications in NFC phones.

Infineon, which annually tops the list of the world's largest suppliers of smart card chips, based on revenue, believes most NFC phones will come embedded with secure elements starting this year. And the chip maker predicts it will be shipping “double-digit millions” of these embedded chips per quarter by the end of 2011.

Jürgen Spänkuch, director of business development for embedded security, part of Infineon’s chip card and security division, said he agrees with analysts, including UK-based IMS Research, which have projected that a large majority of NFC phones will come with embedded chips.

IMS told NFC Times in late April that it projects 75% of the roughly 70 million NFC phones predicted to be shipped in 2011 will come with embedded chips, and the percentage will grow in following years. Many of the phones also will support applications on other secure elements, especially SIM cards.

Although it also supplies secure elements for NFC-enabled SIM cards and microSDs, Infineon appears to be playing up its market opportunity for embedded chips in the phones.

Infineon’s strategy is based on the expected move by smartphone makers to begin buying chips that combine NFC with such other wireless technologies as Bluetooth, WiFi, GPS and FM as early as next year.

A number of large wireless semiconductor suppliers are gearing up to supply these so-called “combo” chips incorporating NFC, including Broadcom, Qualcomm, CSR, and probably Marvell and Texas Instruments.

But for the smartphones packing these wireless chips to do payment and other secure applications, such as access control and transit ticketing, they would need secure elements.

At present, smartphone makers, such as Samsung Electronics and Research in Motion, buy standalone NFC chips, usually bundled or stacked with secure chips.

Within five years, there will be no need for these standalone NFC “modem” chips, contends Spänkuch.

“We are convinced that NFC functionality will migrate to those combo ICs,” he told NFC Times. “I strongly suspect that NFC functionality as standalone will disappear in the long run.”

He defines “long run” as two to five years, and predicts the first combo chips packing NFC will be shipped for smartphones in 2012.

U.S.-based Broadcom is the wireless chipmaker most likely to introduce such NFC-enabled combo chips, say observers, and the company, which has supplied chips for the iPhone among other smartphones, has said it would combine NFC with WiFi and Bluetooth in future chips. It declined to say when it would introduce these chips, however.

NXP Also to Focus on Secure Chips
Infineon competitor NXP Semiconductors, which is probably the largest supplier of standalone NFC chips, will eventually follow the same strategy as Infineon–that is to focus on supplying secure elements after NFC gets built into combo chips, confirmed NXP CEO Richard Clemmer to financial analysts in early May. Netherlands-based NXP also plans to include NFC software in its offer, as it recasts itself as an NFC company, not just a supplier of NFC “radio” chips, as Clemmer put it.

“So, when we talk about NFC, we’re talking about the secure element to be able to provide the bulletproof security, as well as the software to be able to facilitate that radio and the secure element associated with it,” Clemmer said in response to an analyst's question.

But unlike Infineon, NXP could continue to supply standalone NFC chips stacked with its secure element, a product it calls the PN65. NXP supplied the PN65 for Google’s Nexus S NFC phone.

Standalone NFC Chips–Window Closing?
It’s open to debate just how large a window these standalone NFC chips will have before combo chips take over. If the standalone chips make up a substantial share of the NFC phone market for years to come–perhaps in feature phones and low-cost smartphones–Infineon stands to lose market share to competitors.

Other Infineon rivals are planning to ship standalone NFC chips stacked or integrated with secure elements, including Samsung Semiconductor, Renesas Electronics and STMicroelectronics. Presumably they will be using their own chip technology for the secure elements.

Besides NXP, the only other chip supplier believe to be shipping standalone NFC chips in volume is France-based Inside Secure.

Infineon this year started supplying its embedded secure element, the SLE 97144SE, to Inside for the latter’s SecuRead stacked NFC chip.

But Inside, which recently announced plans for an IPO, said it intends to produce its own secure chips for SecuRead in 2012 or 2013, using technology it acquired with the purchase last year of Atmel's smart card chip unit.

Inside CEO Rémy de Tonnac told NFC Times that he believes there will be a market for NFC standalone chips for years to come, especially in feature phones. They would also be used in accessories, such as headsets, among other devices, say some observers.

Infineon usually touts security in its promotions for its smart card chips, so it’s not surprising it is focusing on secure elements for NFC phones. The chip maker also may have decided it was too far behind NXP and Inside Secure to develop a standalone NFC chip before combo chips begin to be shipped widely for phones.

Seeking More NFC Publicity
Up until now, Infineon has been largely silent about its role in the NFC ecosystem. But it issued a press release May 23, no doubt seeking to tap in on the recent market mania for NFC and to draw more attention to its secure elements. The release featured its “new” embedded chip, the SLE 97144SE, though this chip was already being shipped by Inside Secure to such handset makers as Research in Motion for two NFC-enabled BlackBerry models RIM plans to introduce.

Infineon in the release also mentioned its chips for SIM cards and microSD cards that can be used as secure elements in NFC phones.

But the release emphasizes the company’s embedded chips and states that with SIM cards often disposed of more quickly than phones, a “higher degree of security is expected of the embedded secure element than of the NFC chip for SIM card or microSD card.” That could change as SIMs and microSDs carry more security-heavy applications, said Infineon’s Spänkuch.

Still, Infineon, whose smart card chip division brought in €407 million (US$534 million) in the fiscal year ending last September, up 19% from a slump in 2009, apparently sees embedded secure chips as key to its future growth. NT