What Does the Future Hold for the NFC Secure Elements?

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By Phil Sealy | 3Q 2017 | IN-4757

Overall the NFC secure elements market is going through a transitional period, reflected in 2016, when overall secure element shipments declined YoY.

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Evident Shipment Decline in 2016


Overall the NFC secure elements market is going through a transitional period, reflected in 2016, when overall secure element shipments declined YoY.

Individually, the Single Wire Protocol (SWP) market can be considered one of limited future opportunity, since the closure of the Softcard venture in the U.S., pockets of SWP growth will remain, but will be limited to certain geographic markets, including Japan and South Korea.

Equally the 2016 embedded secure element market proved disappointing with no real movement of note. Today, the embedded Secure Element (eSE) market is very closely tied to developments and/or the success of both Apple and Samsung handsets respectively.

So, what does this mean for the secure elements market?  Where will future growth stem from?  When will the NFC secure elements market move out of this transitional period?

SWP & eSE Combined


NFC Secure Element Shipments by Form-Factor

World Markets, Forecast: 2015 to 2016 (Source: ABI Research)
Segment Units 2015 2016
Embedded Secure Elements (Millions) 371.93 376.50
SWP SIM (Millions) 224.19 128.36
Total (Millions) 596.12 504.85
YoY Growth -15%

Overall, the secure elements market retracted 15% YoY in 2016. Separately, the eSE market grew 1.2% with SWP significantly decreasing by over 49% YoY. 2016 may have marked the end of the secure element “ownership” battle, with OEMs now leading, in terms of hardware ownership and services, via Samsung and Apple Pay.

However, the above table does not take into consideration HCE (Host Card Emulation), which arguably was the technology which displaced SWP SIMs. The fact that overall secure hardware declined is not necessarily indicative of a market which is on a downward spiral.

Having said this, the secure element battle is far from over, considering that NFC secure elements (regardless of form-factor) are more than a digital payments enabler, with applications including transit and access control to name but a few. The hardware battle will likely turn to a services playing field and with HCE breaking down partnership barriers, there is an expectation that non-OEM led service providers will leverage HCE as the security technology to launch new non-payment services. 

SWP May Have Lost, but a New Hardware Contender Has Entered the Ring


The overall reduction can be attributed to the large reduction in SWP SIM demand, paired with slight growth within the eSE market. The significant SWP decline was evident in Gemalto’s FY2016 financial statement, outlining the closure of Softcard as one of the primary reasons for a YoY 19% sales reduction within its mobile division.

Overall the eSE market in 2016 was flat with no new significant adoption of note. The eSE market will continue to be largely tied to the success/demise of flagship Samsung and Apple handsets, until other OEMs launch payment platforms or until Samsung pushes eSE into lower-end devices.

However, future increases will not only be driven by the handset market, but also by expansion into other companion devices, most notably smart watches and fitness trackers. There is an increasing number of wearable devices making use of eSE and this will help provide a growth platform from a secure element hardware perspective.

Furthermore, both Infineon and STMicroelectronics have launched eSIM solutions with integrated eSE capabilities. This multi-form-factor solution could hinder standalone eSE shipments or at the very least, slow growth, particularly within smaller devices were design space is a valuable commodity. eSIM inclusion is becoming increasingly popular within wearable devices and the ability to connect and offer a payments service from one chipset is a value proposition that many OEMs will favor.

Today it’s all about services and secure element ownership. Apple and Samsung have a significant head start and in terms of payments are arguably streaks ahead of the rest. It would be sound to assume that these payment platforms will be expanded to include other services, driven by the fact that mobile payments share many synergies with other services including ticketing, access control and loyalty.  

For ABI Research, it is clear that the OEMs have won the services battle via the use of standalone eSE hardware, but the rise of eSIM with eSE capabilities brings a new hardware challenger to the table and one which could displace future standalone eSE shipments.


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