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NFC Market Estimated to be Worth 10 Billion by 2016

source - IHS iSuppli

source – IHS iSuppli

According to the market research report “Near Field Communication (NFC) Market – Global Forecast & Analysis (2011 – 2016) forecast by Products (NFC Chip, Micro SD Card, Integrated SIM, Reader & Middleware), Applications (Mobile Payment, Ticketing, Booking, Data Sharing, Access Control, Non-Payment, Infotainment, Advertisement)” published by MarketsandMarkets, the total Near Field Communication applications market is expected to reach $10 Billion USD by 2016 at a compound annual growth rate of 38% from 2011 to 2016.

Near field communication (NFC) is a set of standards for smartphones and similar devices to establish radio communication with each other by touching them together or bringing them into close proximity, usually not more than a few centimeters. Present and anticipated applications include contactless transactions, data exchange, and simplified setup of more complex communications such as Wi-Fi Communication is also possible between an NFC device and an unpowered NFC chip, called as “tag”.

NFC and Bluetooth are both short-range communication technologies which are integrated into mobile phones. As described in technical detail below, NFC operates at slower speeds than Bluetooth, but consumes far less power and doesn’t require pairing.

NFC traces its roots back to Radio-frequency identification, or RFID. RFID allows a reader to send radio waves to a passive electronic tag for identification and tracking.
NFC technology equips user with an ability to make a cashless payment using his/her mobile phone. In 2011, mobile payment is the major factor driving the NFC market and it will continue to do so for next five years. The NFC mobile payment market is expected to cannibalize the smart card payment market. Currently, security and lack of standardization are the two major issues related to this market. NFC technology is not completely secure and hence customers have many reservations to make payment via NFC device.

NFC market includes products such as NFC chips, tags, readers, NFC based micro SD cards, and NFC enabled SIM/UICC cards. NFC products market is highly fragmented market and each segment reflects different trends. For example, NFC chip market currently is almost monopolistic market with NXP Semiconductors holding more than 80% of the market share, whereas NFC tags market is highly scattered market with number of players and flat competition. Both, NFC based SIM/UICC cards and micro SD cards are not expected to reach their full potential as they will slide in to obsolescence due integrated NFC mobile devices.

Mobile payment application is undoubtedly the most attractive application of NFC technology. It includes both, in-store payment and on-line payment. Near Field Communication Market is expected to cannibalize the smart cards market for cashless payments. Other major applications of NFC technology are access control, ticketing, data sharing, and advertising.

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