Robert DeFrancesco’s

TechStockProspector.com
April 25, 2011

NXP Semiconductors (NXPI): A Player in the Hot NFC Space

This article was originally published in the January 2011 issue of Tech-Stock
Prospector when NXP Semiconductors shares were trading around $23.50. The stock
recently closed at $33.46.

There’s starting to be a lot of buzz about Near Field Communication (NFC), a short-
range communication technology that allows mobile phones and reception devices
(other mobile phones, payment terminals or ID readers) to talk to each other within
a distance of about four inches.

With the wave or tap of a smartphone, users will be able to make a payment, swap
contact details, access secured environments and read information tags. NFC chips
within a smartphone will hold financial information, gift cards, loyalty cards and
coupon subscriptions. It’s estimated that NFC could account for a third of $1.13
trillion in global mobile-payment transactions projected for 2014.
Google, which is said to be working on its own mobile-payments service, last
year acquired Zetawire, which has a patent on a way to combine a phone-based
wallet with a reward-and-loyalty system. Google Ventures also invested in Corduro,
a privately held developer of mobile-payment solutions. The Android Gingerbread
OS, released in early December, already has some NFC features, including smart tag
reading capabilities.
Chipmaker NXP Semiconductors (NXPI, $23.36), a co-inventor of the
technology back in 2002, is now producing its sixth-generation NFC chips and is the
established leader in secure mobile transactions. The company provides more than
80% of the contactless security chips used for consumer banking cards as well as
government-issued IDs and passport programs.
In the middle of December, NXP announced a strategic collaboration with
Google to provide a complete open source stack for NFC, which will be fully
integrated into Gingerbread. Google also included NXP’s NFC controller PN544
(introduced in 2009) into the newly launched Nexus S smartphone, which was co-
developed with Samsung.
NXP Semi shares have more than doubled just since the end of August.
There’s a lot of potential with NFC, but NXP certainly won’t have the chip market to
itself. Last month, Broadcom (BRCM) introduced its BCM20203 NFC tag solution
for consumer devices. NFC can be used with a variety of consumer devices,
everything from mobile phones and tablets to digital TVs, remote controls, wireless
mice and Bluetooth headsets. The 20203 uses such little energy that it’s designed to
be powered only through the energy harvested from the reader on the other side of
the connection.
Tech-Stock Prospector Managing Editor Rob DeFrancesco has more than 20
years of experience covering the tech sector. He is a former senior writer with
Louis Rukeyser’s Wall Street.

TechStockProspector.com, launched in 2003, is an investment-research service

focused primarily on the networking, storage, security, wireless and software
sectors. Annual subscription: $350. For more information or to place an order,
call 800-392-0998.