NFC Tags Market Given a Boost by Apple

At its recent worldwide developer conference, Apple announced its intent to expand its Near Field Communication (NFC) capabilities, enabling iPhones running iOS 11 to read NFC tags. The announcement was met with great applause from the NFC tag ecosystem, pitched as a final piece of the NFC puzzle and a platform from which NFC tag use cases can begin to flourish, perhaps finally being able to fulfill the much-hyped market potential predicted a few years ago. 

NFC as a technology is almost 20 years old, and NFC connectivity has been largely available in selected Android devices since 2011/2012. Apple’s decision to finally unlock NFC tag reading capabilities opens up its API’s to what Apple refers to as “core NFC” to third-party developers. Arguably, this is too little too late. Yet, Apple is not known as a vendor that moves first. Rather, it often sits back, observes a market, and then strikes once it feels the market is ready.

This is not  Apple’s first “late entry” to a market, having somewhat made a business out of its ability to launch “improved” technology products and services, often months, if not years, after initial technology/service launches.

Additionally, Apple’s decision to unlock the NFC controller was likely, or partially, pushed by third-party OEMs, developers, brands, and service providers looking to take advantage of Apple’s NFC controller to enable access to a far greater audience.

Commercial and large-scale use cases for NFC outside of payments have been somewhat lackluster to date, but this is partially due to the limited market opportunity, which previously could only target Android devices. Arguably, Apple’s decision to lock down its NFC capabilities has held back the NFC tags market, with service providers, brands, etc., unwilling to invest in a technology that can only reach a limited number of users operating NFC-enabled Android devices.

There are a host of NFC tag applications available, including social connectivity, targeted marketing, loyalty, smart posters, anti-counterfeiting, and brand protection. Therefore, NFC could become the next-generation platform from which brands are able to reach out and connect with consumers outside of the traditional retail environment.

Moreover, NFC tag technology presents a significant opportunity to offer convenient and seamless pairing of Bluetooth and other connected devices, ranging from wireless headphones and speakers, to automotive infotainment systems. This functionality has been around for several years, driven by other smartphone vendors like Sony, which has also made standalone customizable NFC tags for use between smartphones and different devices. Certain Bluetooth chipsets already available from vendors such as Nordic Semiconductor include an on-chip NFC tag incorporated into the SoC for these, as well as other applications.

Furthermore, one of the major challenges in the IoT world will be the secure provisioning of many headless IoT devices such as smart bulbs, motion sensors, and door locks, among many others, that come without displays or buttons. NFC can help securely pair these devices to the access point, router, hub, or gateway device. For example, a ZigBee smart bulb with an embedded NFC tag could connect securely to the home network just by tapping it against the NFC-enabled gateway device or via an NFC-enabled smartphone, simplifying and speeding up the commissioning process. NXP demonstrated an implementation of this at MWC 2016, though NFC penetration in smart home hubs and gateways to date remains small.

For other devices, smartphones can be leveraged as a temporary touchscreen for products without displays, easing configuration and maintenance, lowering costs, and shrinking the size of these IoT-connected devices. In addition, NFC’s short range also brings inherent security advantages for commissioning applications, as passive tags can enable a whole host of new connected opportunities that do not require a battery.   

Overall, NFC tags can bring new levels of convenience across a multitude of end markets and can play a significant role in market convergence as it pertains to IoT market adjacencies. A prime example of this would include instances where a smart home interacts with other end-market devices, including a connected car, potentially using an NFC-enabled smartphone as the bridge between the two device/end market types.

The announcement by Apple does not increase the amount of NFC use cases per se, but it does create further investment viability into NFC tag technology as OEMs, brands, service providers, etc., are now able to target a much broader user base. In addition, Apple’s rich developer ecosystem may be able to help grow some of these applications that have gained limited traction to date, while creating innovative new use cases for the technology.

Therefore, limitations will remain for NFC applications with the secure element piece remaining under Apple’s direct control. In essence, the secure element piece is linked to services from which Apple can monetize, such as its Apple Pay platform. It is likely Apple will expand this platform, extending it from payment capabilities into new and complementary use cases including transportation and access control.

Despite this last point, Apple’s willingness to finally open up its devices to enable NFC tag reading is a market positive and one that may help push the NFC tag market and subsequent applications into the hands of many more end users.