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2 Reasons the iPhone Will Never Adopt NFC

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You won't find many stocks that have performed better than NXP Semiconductors (Nasdaq: NXPI  ) over the past year. The stock is up 52% versus a still-remarkable-but-more-modest 25% for the S&P 500.

Credit Android for the gains. Samsung's hot-selling Galaxy S III includes NXP's near-field communications, or NFC, chips for powering wireless payments via Google's Wallet app. The S III has sold more than 20 million units as of this writing.

For those unfamiliar, NFC is a short-distance radio communications technology for exchanging data between two devices. For Google Wallet, this means placing an NFC chip in a phone and matching it to a reader. Retailers that embrace the concept could just as easily swipe a handset as a credit card.

Longer-term, proponents of NFC generally and NXP specifically say the company will see a bounty of new profits when Apple (Nasdaq: AAPL  ) finally adopts NFC in the iPhone, helping accelerate iTunes' transformation into a mobile wallet. Not likely.

Here are two reasons why these dreamers are destined to be disappointed:

  1. Google Wallet doesn't need NFC in order to be a success. I've personally used my "wallet" to purchase movie tickets using my iPhone. Only a few clicks required.
  2. Check-in and connect services already connect to e-payment services. Both Groupon (Nasdaq: GRPN  ) and PayPal are actively developing iPhone e-payments services knowing there's no onboard support for NFC technology.

Even so, there may be merit to the rumors of an NFC iPhone in our future. Apple recently acquired NFC expertise via its July purchase of AuthenTec (Nasdaq: AUTH  ) . The company's AES2750 sensor system uses fingerprint biometrics to secure NFC-capable mobile wallets. It's fair to say the Mac maker is at least considering NFC payments in a future version of its signature handset.

And if it doesn't happen? Again, so what? NXP long ago earned its spot on our Motley Fool Rule Breakers scorecard, and all signs point to further adoption of NXP's advanced chip designs in top-of-the-line Android smartphones.

Nokia (NYSE: NOK  ) may also help to sharpen NXP's profit picture. The Finnish phone maker is already an NXP customer; imagine if its future Windows smartphone designs are built to handle NFC transactions as deftly as Android alternatives.

So don't hung up waiting for NXP to ink a deal with Apple. With or without the iEmpire, there's still plenty to like about NFC technology generally and NXP specifically.

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Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team and the Motley Fool Supernova Odyssey I mission. He owned shares of Apple and Google at the time of publication. Check out Tim's web home, portfolio holdings and Foolish writings, or connect with him on Google+ or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.

The Motley Fool owns shares of Google and Apple. Motley Fool newsletter services have recommended buying shares of Google, NXP Semiconductors, and Apple. Motley Fool newsletter services have also recommended creating a bull call spread position in Apple. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Read/Post Comments (4) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 01, 2012, at 6:19 PM, constructive wrote:

    "The iPhone Will Never Adopt NFC" and anyone who thinks they will is "destined to be disappointed".

    Those are pretty strong words, which your article doesn't come remotely close to backing up.

    In fact, you quickly contradict yourself: "Even so, there may be merit to the rumors of an NFC iPhone in our future."

    This is less of a reasoned article and more just click bait.

  • Report this Comment On October 01, 2012, at 6:29 PM, AppieFlappie wrote:

    With this article you showed us that you dont know anything about technology.

    You seem to forget that Windows Phone 8 will have Wallet functionality that exceeds that of iOS or Android. Combine this with Win8's NFC capability the future is really bright for NFC companies.

  • Report this Comment On October 03, 2012, at 7:40 AM, mouse1235 wrote:

    Your article certainly contradicts the hype and the articles that were written not to long ago promoting nfc technolgy what a flip flop.

  • Report this Comment On October 10, 2012, at 10:03 AM, Pappysfool wrote:

    I agree with mouse1235, quit flip flopping. One day the future could not be brighter for NXP then the next article it's probably not as good as you projected. I would appreciate clear and consice advice from the fools at Motley Fool.

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