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Is An NFC-Equipped iPhone Imminent?

This week, Apple (Nasdaq: AAPL) released its Supplier Responsibility Report for 2011, which closely examines the environmental effects and working conditions at factories that contribute to building its products.

Apple reports that it boosted the number of supply chain audits by 80% this year, established new requirements for working conditions and discovered fewer cases of underage labor.

Kudos to Apple for stepping up its ethical standards.

But what really has my attention is the list of product suppliers that Apple released with the report. Something the company’s never done before.

According to Macworld, the “release of Apple’s supplier list appears to be prompted by the company joining the Fair Labor Association, a nonprofit organization that targets sweatshop conditions. Apple is the first technology company to join the FLA, which will audit Apple’s supply chain to see how it measures up against the group’s Workplace Code of Conduct.”

Whatever the reason, it shows us more clearly than ever before which companies are most likely to benefit as Apple continues to pump out smash-hit products.

The list included 156 companies, which, according to Apple, “account for more than 97% of what we pay to suppliers to manufacture our products.”

But there’s only one company on the list that has my attention right now: NXP Semiconductors (Nasdaq: NXPI).

Investors Are Placing Their Bets

If you’re a longtime Wall Street Daily reader, you know that I’ve been alerting readers to NXP’s investment potential for months now, since it’s the most direct way to play the burgeoning near-field communications (NFC) space.

You see, not only did NXP essentially invent NFC technology, but as an official Google (Nasdaq: GOOG) partner, the company’s also on tap to equip Android smartphones with the technology, just as the search giant ramps up its Google Wallet mobile payment efforts.

Now, Apple hasn’t released any official news regarding NFC. But rumors that the company has been testing the technology in iPhones have been circulating for a while.

In fact, back in August 2010, TechCrunch’s Steve Cheney reported that the tech giant was already working with NXP: “Sources tell me that Apple has built NFC-enabled iPhone prototypes using hardware from NXP Semiconductor, and is testing mobile payments today.”

And now that we see NXP clearly identified as an Apple product supplier, it could indicate that NFC will finally make it into the next iPhone version. Which would give NXP – and the entire NFC market – a massive boost.

The fact that NXP’s shares soared as much as 12% yesterday shows that I might not be the only one who thinks so.

But there are two factors to consider before immediately crowning NXP as Apple’s go-to NFC supplier.

Beware the Competition

First of all, NXP doesn’t just produce NFC chips. It develops a range of products like smart meters that monitor energy output, drivers for efficient lighting, home automation systems and wireless infrastructure technology. And most importantly, of course, it also develops audio and interface solutions for mobile devices.

So, as there are a number of other things for which Apple might be employing NXP – Apple listing the company as an equipment supplier doesn’t necessarily mean that the next iPhone is getting NFC.

Besides, even if Apple is indeed planning on giving the iPhone 5 NFC capabilities, it’s important to keep in mind that Qualcomm and Broadcom (Nasdaq: BRCM) are Apple suppliers, as well. And both companies have also been pegged as possible candidates for Apple’s foray into near-field communications.

With that said, given its comparatively established position and unmatched security in the NFC space, my bet’s still on NXP. But we obviously can’t say for sure until we hear more details regarding Apple’s NFC game plan.

So stay tuned.

Good investing,

Justin Fritz

Justin Fritz

, Executive Editor

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