NXP Semiconductors today said sales of its NFC chips and secure elements grew by just under 3% during the first quarter compared with the previous quarter, a lower growth rate than during 2012, though CEO Richard Clemmer sounded optimistic tones about prospects for future growth.
The growth rate for the quarter is below the 20% quarter-on-quarter growth NXP reported in the fourth quarter of 2012 and 30% increase in the third quarter of last year.
Although NXP didn’t release a specific figure for its NFC revenue, it came in at a little more than $70 million for the first quarter–considering NFC makes up nearly all of NXP’s “emerging ID” business, which accounts for about 25% of revenue for its Identification business unit. That fast-growing unit generated a total of $300 million in sales during the quarter, said NXP.
NXP also didn’t release an update on its design wins for NFC smartphones and tablets, as it sometimes does for quarterly earnings reports. It last released a design-win figure of 250 models, at the Mobile World Congress in late February, up from around 200 design wins the Netherlands-based semiconductor supplier had announced at the end of the third quarter.
“We still have design wins across the board with all major customers,” Clemmer said, in answering a question from a financial analyst during a conference call today. “We’re certainly not backing off of the strength of our technology and leadership position that we have.”
NXP earlier disclosed that it shipped 125 million NFC chips in 2012 for smartphones and tablets, beating projections for the NFC device market. It owned more than 80% of the NFC chip market last year.
More Competition
But NXP is facing new competition from other chip makers, led by U.S.-based Broadcom, which captured the NFC chip business from Samsung Electronics for the forthcoming Galaxy S 4, along with a few other recently released Samsung phones and the most recent Nexus devices from Google.
Big smartphone processor chip makers Qualcomm and MediaTek are planning to introduce their own standalone NFC controllers during the next quarter or two. And Broadcom earlier this year predicted its first quad combo wireless chip incorporating NFC, along with Wi-Fi, Bluetooth and FM radio, would be in mobile handsets this summer. Combo wireless chips are used by most big smartphone makers, and NXP doesn’t produce these types of chips.
“What we’ve always said is eventually there will be an integration of the (NFC) radio (in combo chips) and our objective is that we can provide the secure element associated with it,” Clemmer told analysts today, echoing statements he’s made in the past. “And we clearly see that playing out, although it’s played out at a little slower rate than we expected several years ago.”
NXP is introducing a new embedded secure element, which sources say will pack roughly 1 megabyte of memory and support the latest standards. It won’t be available until later this year, however.
And observers believe Broadcom sees NXP as a competitor and, therefore, is not keen on working with NXP's secure elements. Broadcom is currently pairing its NFC controller chip with a secure element from STMicroelectronics, running an Oberthur operating system.
NXP shipped about two-thirds of its NFC controller chips stacked with its secure elements in 2012, including NFC chips the run in all or nearly all of the Samsung Galaxy S III model sold–though few of the embedded chips have been used so far.
Intel also uses an NXP embedded secure element for its smartphone reference designs, and it’s possible that other big processor chip makers could use an NXP secure chip for some of their NFC implementations.
“So we’re still clearly in early innings,” said Clemmer during the conference call. “When you start talking about the future, like in the 2015 time frame, most of the analysts are talking about half the smart phones being NFC enabled, by that point in time, so (there are) a lot of growth opportunities there.”
ID Business Grows
NXP said its core ID business, which includes chips for contactless banking cards, Mifare-based transit cards and government ID, along with tags and labels, grew by about 4% in the first quarter, compared with the fourth quarter of 2012.
Chips for contactless banking cards were up, driven in part by shipments to card vendors serving the Chinese market. Clemmer pointed to the Chinese banking market as a “near-term” growth opportunity.
“They’re skipping some of the intermediate steps that some of the other countries have gone through and moving to contactless banking in a very strong position,” he said.
Shipments of chips for transit and government ID declined slightly during the first quarter, while sales of chips for tags and labels were flat, Clemmer said.
Total sales for NXP's Identification business unit–combining chips for core ID products with NFC and other emerging ID products–showed growth of about 3% in the first quarter compared with the fourth quarter of 2012.
Clemmer characterized that result as positive, considering that the first quarter is seasonally a weak quarter of the year. The company is projecting low double-digit growth in its Identification business unit during the second quarter of 2013 compared with the first quarter.
When compared with the same period a year ago, the Identification business unit grew by more than 60% during the first quarter of 2013, from $187 million to $300 million. That makes ID by far the fastest growing unit in NXP’s High Performance Mixed Signal, or HPMS, business segment.
NXP did not break out a figure for how much sales of NFC chips and secure elements grew on a year-on-year basis in the first quarter, but the increase was likely substantial.