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As Apple Stays Away, Google Doubles Down on NFC

By Sam Mattera - Nov 3, 2013 at 5:00PM

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Apple and Google are moving in different directions when it comes to NFC, and it could affect chip suppliers like Broadcom.

When it comes to NFC, the mobile technology made possible with chips from companies such as Broadcom (NASDAQ: BRCM), Apple (AAPL -0.29%) and Google (GOOGL -0.14%) are heading in opposite directions. Apple continues to shun the technology, going so far as to push alternatives. Google, meanwhile, loves it, building a feature into the latest version of Android that gives NFC-based mobile payments their best chance of success yet.

iOS 7 ignores NFC in favor of AirDrop and iBeacon
Despite the growing prevalence of NFC among Android devices, Apple chose not to include it on the new iPhone 5s. Instead, Apple went in an entirely different direction, including two alternative technologies capable of similar functionality.

Samsung's Galaxy phones include S-Beam, a feature that allows users to send each other data (files, playlists, and so on) by simply touching their phones together. At the heart of this technology lies NFC. Apple has built a similar feature into iOS 7 (AirDrop), but it doesn't rely on NFC. Two nearby iPhone owners can send each other data, and they don't even need to bump their phones together; instead, using a direct Wi-Fi connection, the files are beamed from one iPhone to the other.

Another major use of NFC is mobile payment technology. With Google Wallet, owners of some Android handsets can use their phones as a method of payment, tapping the device on the merchant's NFC-equipped terminal. Again, Apple has created an alternative -- iBeacon. Now, stores can set up physical sensors that connect to the iPhone using Bluetooth. Apple has yet to really exploit this technology, but it could eventually be behind a long-expected push into mobile payments.

KitKat gives Android devices the ability to mimic cards
Unfortunately for Google, its push into mobile payments has been less than successful. Even if you have an Android handset, want to pay with Google Wallet, and the merchant you happen to be buying from has an NFC-equipped terminal, there's a good chance that it won't work: AT&T, Verizon and T-Mobile have blocked it.

Because Google Wallet needs to access a part of the handset controlled by the carriers, they can block access -- and they have, in favor of their own, upcoming competitor. But Google has created a workaround.

Google's next version of Android, KitKat, includes a modified version of Google Wallet that uses a slightly different technology. Now, the program doesn't need to access the phone's secure element at all -- carriers should have a difficult, if not impossible, time of shutting it down. There are still challenges to the widespread acceptance of NFC-based mobile payments, but with this new technology, Google has just removed a significant barrier. 

Google uses a Broadcom chip to make it work
To make this new system work, Google is relying on an NFC chip made by Broadcom. Its new Nexus 5 is equipped with the BCM20793M, a special NFC chip that doesn't include the secure element at the heart of Google Wallet's old functionality.

Many investors may think of NXP Semiconductors when they think of a play on NFC, but Broadcom is heavily tied to NFC itself. Broadcom's Mobile and Wireless division, a business segment that includes Broadcom's NFC business, brought in half the company's revenue last quarter and about 25% of its profits.

To be fair, that segment operates several other businesses, most notably Wi-Fi, but Broadcom has cited NFC as an area of growth. Indeed, Broadcom has reportedly scored several NFC wins this year, including Samsung's Galaxy S4.

The future of NFC
Without Apple's support, it's hard to be too bullish on NFC. Still, Google's Android continues to grow in popularity, and with KitKat's new functionality, the future for NFC-based mobile payments has never looked better.

Sam Mattera has no position in any stocks mentioned. The Motley Fool recommends Apple, Google, and NXP Semiconductors and owns shares of Apple and Google. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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