NXP Lowers Projection for 2011 NFC Phone Shipments

Jul 29 2011

NXP Semiconductors, the largest supplier of NFC chips, has lowered its projection for total NFC phone shipments for 2011 to 40 million or less–substantially lower than the 70 million it had been projecting.

CEO Richard Clemmer, speaking late yesterday to financial analysts on a conference call following release of NXP’s second quarter results, said orders for NFC chips from handset makers for the second quarter had come in lower than expected, meaning the “ramp” of NFC phone shipments by handset makers projected for the third and fourth quarters of 2011 would be delayed.

“We expected NFC to have an initial ramp in Q3 and a strong ramp in Q4, and we clearly see that pushed out a quarter or two,” Clemmer said, adding: “You know, all indications we have is that the opportunity is just as significant as we had said. But clearly, if you look at it on a near-term basis, it hasn’t materialized at the rate we had planned for and the rate we had put capacity in place for.”

Clemmer seemed to blame the delay on mobile operators for failing to order as many phones as expected because of continued problems agreeing on NFC business models and also on handset makers that are experiencing “business challenges.” He did not elaborate.

But Clemmer said NXP is working with handset makers on 60 to 62 models to incorporate its NFC chips and possibly its secure elements and NFC phone software. The highest profile design win for NXP has been for Google’s Nexus S NFC phones, but the chip maker has also announced wins for Android phones to be introduced by Sony Ericsson and for some ZTE phones. And NXP also supplies Nokia’s NFC phones, among others. NFC Times reported in May that NXP was working with handset makers on about 40 NFC models. 

That figure has grown to 60-plus models. But it remains to be seen when all of these models will hit the market. And it’s unlikely that the iPhone is one of them. Clemmer said in May that he’d be surprised if the next iPhone from Apple supported NFC.

NXP’s lowering of its projection for NXP phone shipments for 2011 also means it will probably lower its projection for 2012. It had earlier said that NFC phone shipments would double next year from 2011. This was based largely on the 70 million phone projection, which would have placed the 2012 shipment forecast at about 140 million.

And Clemmer in May suggested NFC phone shipments could approach 100 million units this year if Google’s rosy projections for Android NFC phone shipments come to pass. NXP had also said earlier that shipments might come in as low as 40 million. In its latest projection, NXP said the actual shipment figures might even be “slightly” below 40 million.

NXP’s NFC phone projections include phones using NFC chips from all suppliers, though Netherlands-based NXP has the largest share of the budding market.

“With it being pushed out a quarter, it would be slightly lower for next year than we’d originally anticipated,” said Clemmer in response to a question from an analyst, adding that NXP still expects at least a doubling of phone shipments next year. “But there’s still a wide range of outcomes associated with it. It depends on how successful Google is in pushing the Google Wallet through a broad array of platforms. It depends on the 60 handsets that we are currently working with, how fast they ramp up, and actually some suppliers pushing out new models.”

Handset makers say they are ready to ship phones with NFC inside, but haven’t yet received the big orders from mobile operators, said Stela Bokun, senior analyst in Europe for Pyramid Research, who projected earlier this year that NFC smartphone sales would reach only about 11.5 million units. She might revise the figure.

“Operators are not sure how much they will potentially earn from NFC based services,” she told NFC Times. “Since they don’t know how much money NFC services will generate, there is a big internal struggle between their departments.”

NXP executives said yesterday they had invested in expanded manufacturing capacity late last year to be ready for the ramp-up of chip shipments in the second quarter, which didn’t happen. That hurt Q2 gross margins. The delay in NFC along with guidance for the third quarter by NXP that overall sales would be down by as much as 5% compared with the second quarter, did not make investors happy. They sent NXP shares plunging by as much as 16.3% this morning on the Nasdaq exchange, following the release of the Q2 results after the close of trading Thursday afternoon in New York. The share recovered most of the ground later in the day and closed down 3.7%.

Inside Secure, the other major provider of NFC chips so far, which is supplying Research in Motion and also ZTE, was not available for comment.

Clemmer noted that NFC still makes up only a small portion of the chip maker’s Identification unit and even a smaller part of its total revenue. The ID unit had sales of $194 million during the second quarter, up just 2.6% from the first quarter.

Sales of Mifare chips for contactless transit cards also dropped during the second quarter compared with the first quarter of 2011, but NXP didn’t release a breakout of figures. Clemmer characterized the drop as a “supply chain correction.”

“We’re still seeing very strong demand,” he said. “We still have 1.2 billon travelers today using our Mifare tags in 650 cities that have deployed Mifare.”

He said shipments for of chips for banking cards, including those with contactless interfaces, increased during the second quarter, though many of the chips went for cards to be issued in developing countries, and thus brought lower prices. That also hurt margins in the ID unit, said NXP.

Article comments

 
guoxing Jul 30 2011

Sales of Mifare chips for contactless transit cards also dropped during the second quarter compared with the first quarter of 2011, but NXP didn’t release a breakout of figures. Clemmer characterized the drop as a “supply chain correction.” !! i can't understand

Dan Balaban's picture
Dan Balaban Aug 1 2011

He’s saying that transit agencies ordered a lot of Mifare cards during Q1 and so had inventories on hand and, therefore, didn’t order as many cards in Q2.

Please register or login to post a comment.

HEADLINE NEWS

Boston Transit Authority Makes Aggressive Move to Eliminate Cash in Planned Fare-Collection System

NFC TIMES EXCLUSIVE Insight – The Massachusetts Bay Transportation Authority, or MBTA, in Boston plans to completely do away with cash fare payments on its various transport modes when it rolls out its massive new fare-collection system, an MBTA official told attendees during a recent virtual conference.

Israel Launches Nationwide Mobile-Ticketing Scheme; Moovit, Others Provide Apps

NFC TIMES Exclusive Insight – Israel this week launched a nationwide mobile-ticketing system, enabling riders to pay for trips on buses and later on railways, with the charges assessed at the end of each month.

In-Depth: Networks Developing New Uses for SoftPOS, Though Questions Remain about Interoperability and Costs of Technology

NFC TIMES Exclusive Insight – While the idea of letting merchants use their own NFC-enabled smartphones and tablets as acceptance devices to take contactless EMV payments is still getting off the ground, some major payments networks are already working on expanding the technology to enable consumers to tap their own devices to pay.

Planned Account-Based Ticketing Project Remains on Track in Queensland; Expected to Give Customers More Ways to Pay

NFC TIMES Exclusive Insight – The new account-based ticketing system under development for the Australian state of Queensland remains on track and on budget to be fully rolled out by 2022, despite the challenges of working through the Covid-19 pandemic, Martin Bradshaw, project head and general manager for passenger transport strategy and technology for transit agency TransLink, told NFC Times through a spokesman.

Insight: Taiwan’s Dominant Fare-Collection Service Struggles to Stay Competitive in Changing E-Payments Landscape

NFC TIMES Exclusive – EasyCard Corp. remains the dominant contactless stored-value card in Taiwan, boasting of market shares above 70% in transit fare payments and retail transactions nationally amid competition from three other contactless closed-loop cards that vie for transit and low-value retail transactions across the island nation.

In-Depth: California Transport Group Launches Mobile Ticketing, Plans MaaS Rollout

NFC TIMES Exclusive Insight – Officials in California’s Central Valley have launched an app that enables users to buy mobile tickets for bus and rail rides with seven mostly small public transit agencies, with plans to expand to ticketing for electronic car and bike sharing, along with on-demand ride-sharing and van-pool services.

UPDATED: Google Pay Launches with Fintechs in 10 New Countries, as Search Giant Unveils Revamped App; Deeper Move into Financial Services in U.S.

Nov 19 2020

NFC TIMES Exclusive Insight – Google Pay has added its first new countries in 18 months, all of them in continental Europe and all counting digital banks and other fintechs as the vast majority of the issuers across the 10 new markets.

Transport for London Prepares for Major Fare-Collection System Contract

Nov 18 2020

NFC TIMES Exclusive Insight – Transport for London, which runs the largest open-loop fare payments system globally, has issued a notice that it is preparing to seek proposals for a major upgrade of its revenue-collection system.

Visa and Mastercard See Continued Growth in Contactless Usage

NFC TIMES Exclusive Insight – Both Visa and Mastercard say contactless transactions made up a growing share of all face-to-face transactions for cards and other credentials bearing their brands during the last fiscal quarter, crediting in part an increasing aversion to cash by consumers because of the Covid-19 pandemic. Contactless usage rates, however, had been increasing by nearly the same rates before the pandemic.

Apple Pay Enables Ventra Closed-Loop Fare Card in Chicago after Long Delay

NFC TIMES Exclusive Insight – Apple has finally made good on plans to enable fare payments through Apple Pay with the closed-loop Ventra card from the Chicago Transit Authority, or CTA, the latest major closed-loop card the tech giant has enabled in recent months.

Visa Rolls Out SoftPOS technology as It Seeks to Promote Acceptance of Contactless by More Small and Micro-Merchants

NFC TIMES Exclusive Insight -  Visa is rolling out what it calls “Tap to Phone” technology to 15 global markets, as it seeks to enable millions of small and micro-merchants that now mainly take cash to also accept contactless EMV credit and debit cards and credentials on NFC devices.

Trip-Planning Apps Moovit and Transit Enable Ticketing and Payments for Another Transit Agency

NFC TIMES Exclusive Insight – Multimodal trip-planning apps Moovit and Transit have introduced ticketing and payments in their apps for another North American transit agency, following an emerging trend for trip-planning apps to enable users to plan, book and pay for their rides all in one place. The app providers are offering the extra service as they seek ways to give users a better mobility-as-a-service experience.