Will It or Won’t It? Have NFC That Is.

Will it or won’t it have NFC?

In a matter of hours, months of speculation about the successor to the iPhone 4s will likely come to an end. It is said that we’ll finally learn what the new iPhone will be called, what feature/functions it will possess and what form-factor it will embody.    For those who follow Near Field Communications (NFC), the “will it have NFC” question will finally be answered.

For those who have been advocating the mass adoption of NFC, it has been widely believed that an NFC-equipped iPhone would finally push NFC awareness, and therefore adoption, to a rapid tipping point.  In fact, the latest market research supports this assumption.  But what if the new iPhone doesn’t have NFC?  What will happen to NFC adoption?  Let’s take a look at it.

There are principally three impediments to the mass adoption of NFC today: 1) A dearth of NFC-enabled phones. 2) Little consumer awareness.  3) A general lack of compelling uses cases.

An NFC-equipped iPhone would help address the first impediment fairly rapidly.  If history is any indicator, at least 35 million iPhones would likely be sold in the first quarter of its release.  Couple that with the sale of an estimated 50 million NFC-equipped Samsung Galaxy III’s in the same period and nearly a quarter of all phones sold worldwide would be NFC enabled.  Add to that the sale of other NFC-equipped models from Samsung, Nokia and Blackberry and nearly a third of all phones sold in the three months of the iPhone’s release would be NFC-equipped.

Since about a third of U.S. cell phone subscribers replace their cell phones each year, one could assume by using the global ratios from above that about ten percent of U.S. cell phone subscribers would upgrade to an NFC-enabled phone per quarter.  This means that about half of all cell phone subscribers would be using NFC cell phones in less than 5 quarters.  A true tipping point.

The loss of an NFC-enable iPhone would likely slow the mass adoption of NFC smartphones by a little over a year.  Without the iPhone, only about fifteen percent of all phones sold in the first three months of the iPhone’s release would be NFC-equipped.  Extrapolating that take rate against U.S. adoption rates, one could see that it would roughly double the time required to reach a fifty percent penetration rate.

One last thing to remember, the presence of an NFC-equipped iPhone would also encourage other smartphone manufacturers to integrate NFC into their entire model lines.  This would have a positive influence on NFC adoption that would be lost if the new iPhone does not have NFC.

Regarding the second impediment, an NFC-enabled iPhone would certainly raise consumer awareness.  Apple is not in the habit of adding features of this magnitude and not promoting them.  It could, therefore, be expected that Apple would create numerous promotional videos explaining NFC.  Consumer awareness would certainly increase, and increased awareness would fuel demand for the technology.

Should Apple not release an NFC-equipped iPhone, consumer awareness will suffer.  The good news, however, is that Samsung is taking an increasingly proactive role in advocating the value of NFC.  In fact, Samsung has been developing TV commercials and deploying in-venue signage promoting NFC and all indications are that they will continue to do so.

Finally, an NFC-enabled iPhone would probably not have a dramatic impact on the availability of NFC use cases – at least initially.  Upon the iPhone’s launch, Apple would probably, like Samsung, promote peer-to-peer exchanges of information.   A peer-to-peer exchange means two people tapping their phones together to exchange content.   Knowing Apple though, one could expect that Apple would quickly introduce new use cases in the months following the iPhone’s launch.

If the new iPhone does not have NFC, then expect use cases to slowly develop over the next year.  Peer-to-peer and mobile payments will likely be the most promoted uses cases until the innovators start releasing new applications for NFC.

Bottom line, the case for NFC will be greatly advanced if Apple releases a new NFC-equipped iPhone.  Let’s hope they do, but the rumor is that they won’t.  If that’s the case, let’s just cross our fingers and hope that Samsung and Google aggressively take up the banner.  If they don’t, don’t expect NFC to reach a tipping point for two years.


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