Smart card vendor association Eurosmart has substantially increased its estimate for NFC secure element shipments for 2012–by 50% to 150 million units–and forecasts that secure element shipments will grow by another 67% in 2013 to 250 million units.
The large-scale growth has come as Android smartphone makers, led by Samsung Electronics, continue to include embedded secure elements in many or most of their NFC-enabled models, while more mobile operators are gearing up commercial launches of services using NFC SIM cards, said the group. Few of the embedded chips have been used to date.
“This strong growth we see is both for embedded SEs (secure elements) and for NFC UICCs (SIMs),” Eurosmart chairman Oyvind Rastad, of Gemalto, told NFC Times. “The main growth drivers include the fact that major handset manufacturers are including NFC in their smartphones, while MNOs (mobile network operators), banks and merchants have started to market secure NFC services.”
Eurosmart also projected a 54% increase in contactless banking cards for 2013 to 455 million. Most of them would be dual-interface EMV cards.
The association, which includes such major smart card vendors as Gemalto, Oberthur Technologies, Giesecke & Devrient and Safran Morpho; and such major NFC secure element producers as NXP Semiconductors, Infineon Technologies and STMicroelectronics, did not release a breakdown for embedded secure elements versus NFC SIMs.
But it’s at least 70% in favor of the embedded chips, possibly more for 2012. That proportion is based on recently released shipment figures by the SIMalliance trade group, which includes many of the same smart card vendors that make up Eurosmart.
The SIMalliance reported that its members, which account for 90% of the total global SIM shipments, delivered only 30 million NFC SIMs last year, most of them to operators of two countries, South Korea and Japan. They shipped only about 6.5 million NFC SIMs to European telcos, mostly in Western Europe.
That would indicate then that of the 150 million secure elements Eurosmart estimates vendors shipped in 2012, only about 20% were NFC SIMs, while nearly all of the rest were embedded secure elements. There were few secure elements shipped for microSD cards last year.
But Eurosmart and the SIMalliance compile their figures a bit differently. Eurosmart makes estimates for the entire market, not just for shipments by its members, as the SIMalliance does. The SIMalliance also doesn’t make projections.
“It’s true that, definitely, there has been strong deployment of embedded secure elements,” Rastad told NFC Times. “I think we will see high volumes of UICCs as MNOs start to deploy.”
He noted that 2012 was really the first year for significant volumes of NFC SIMs. A number of mobile operators plan commercial launches this year.
But while he declined to comment on the 2013 projection of 250 million embedded chips, it seems likely that most of these units will, again, be embedded chips.
More Embedded Chips Expected to be Used
And unlike 2012, in which Google Wallet in the U.S. was the only use for embedded chips to speak of, 2013 could see more of the secure elements used for applications.
Samsung, which is expected to include an embedded secure chip in all of its Galaxy S 4 models and many others, has revealed a strategy to preload such payment applications as Visa payWave on the chips.
The implementation probably won’t be available for some months after the phone is released, which was scheduled for this week. And activation of the chip will depend on the market–in those countries in which telcos heavily subsidize phones and have their own SIM-centric NFC strategies, Samsung is not expected to activate the chip.
But there are a number of markets where only a portion of the phones sold go through operator channels, and Samsung, along with Visa or other payment schemes could target these countries.
Other Android handset makers, along with BlackBerry, plan to continue to include embedded chips in all or most of their NFC smartphones and tablets, though it remains to be seen whether they will support payment with the chips.
Some smaller Android device makers might not offer the embedded chips in their NFC models, and Microsoft doesn’t support an embedded chip in the version of Windows Phone 8 launched last fall, opting to support only NFC SIMs–in order to appease operators.
John Devlin, UK-based practice director for security and ID at U.S.-based ABI Research, told NFC Times last month that he expected 70% of NFC-enabled smartphones to pack embedded chips. He projected that there would be about 270 million smartphones and tablets shipped this year supporting NFC, most of them smartphones.
The secure area on ARM-based processors in smartphones, called a trusted execution environment, is not considered a secure element.
The same smartphones with embedded chips could support NFC SIM cards and the single-wire protocol connection, or SWP, but while multiple active secure elements in the same device are technically possible, few such devices are likely to be introduced this year because of commercial and implementation issues.
Even with a single secure element active, it remains to be seen when use of NFC phones for payment or other secure applications will take off, given the rivalries that remain in the ecosystem and undefined business models among telcos, banks and others.
Rastad declined to get involved in that debate, but acknowledged that the NFC ecosystem is “at the early stage in terms of commercial service deployment and uptake.
“It has been a long road, and there’s still a long road to go,” he said, but adding: “If the necessary equipment is there, people will make use of it.”
Rastad also didn’t comment on why the preliminary estimates of NFC secure element shipments for 2012 released by Eurosmart last November–of just under 100 million unit–was so far below what the group now estimates the actual shipment figure to be of 150 million. Eurosmart released the updated figure last week at its annual meeting in Brussels.
But among other factors might have been higher than expected shipments by NXP Semiconductors of embedded secure elements stacked with its NFC controller chips. NXP has said that 65% or 70% of its NFC controllers came stacked with its embedded chips in 2012. All or nearly all Samsung Galaxy S III units came with an embedded chip from NXP.
Eurosmart last November also apparently underestimated its projection for NFC embedded chips and SIMs for 2013, forecasting it would come in at 200 million units. The latest projection increases that by 25% to 250 million units.
Growth in Contactless Banking Cards
Meanwhile, Eurosmart estimated that vendors shipped a total of 295 million contactless banking cards in 2012, which the group forecasts will increase to 455 million in 2013.
The increase of 54% echoes growth rates reported by another vendor group, the Smart Payment Association, or SPA, which last week released estimates showing contactless bank cards grew by 66% in 2012, to 224 million from 135 million in 2011.
Shipments more than doubled in Asia Pacific and Western Europe, according to SPA, which also includes such major smart card vendors as France-based Gemalto and Oberthur Technologies, Giesecke & Devrient of Germany and France-based Safran Morpho. The group does not make projections and only counts shipments of its six members, which it says presents 85% of global volumes.
Eurosmart projected that contactless bank cards this year would account for 30.7%, or nearly a third of total banking smart cards projected to be shipped next year of 1.48 billion. In 2012, Eurosmart estimated contactless bank cards made up 24.6% of total 1.2 billion banking smart cards shipped. The SPA placed the percentage of contactless bank cards to total banking smart cards at 23% for 2012.
Rastad said among high growth markets for contactless bank cards in 2013 will be China and other Asian countries, Latin America and the CISMEA region, Commonwealth of Independent States, Middle East and Africa.