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China Mobile takes SIM card route to e-wallets

Junko Yoshida

9/12/2012 12:45 PM EDT
SHANGHAI, China – With the tech world abuzz about whether Apple’s iPhone 5 will include a near-field communications (NFC) capability, China Mobile is pursuing a “China-style” e-wallet solution for mobile handsets: using a SIM card to embed RFID technology into a mobile handset.

Compared to NFC-embedded mobile handsets, the SIM card-based proximity payment solution, will cost less and is friendlier to both users and operators. It also promises faster-to-implement e-wallet applications for the masses. “There is no need for consumers to buy a new NFC phone, they can just replace their SIM card,” said Min Hao, executive chairman of Quanray Electronics.

Quanray, a RFID startup based here, has been a key player behind China Mobile’s proximity payment initiative. Others Chinese partners include Watchdata and NationZ.

China Mobile’s SIM card-based mobile payment initiative isn’t new. The mobile operator has been pushing the idea since 2009.

However, because the SIM card sits right behind the phone's battery, it hasn’t been easy for RFID chip companies to overcome signal attenuation problems caused by the battery. NationZ got around the problem by going to a higher frequency (NationZ used a 2.4-GHz SIM card instead of a 13.56-MHz card). Watchdata solved it by running a wire to connect a SIM card with the antenna.

Hao (left) said going to a higher frequency would be problematic since SIM cards would not be able to talk to the more than 100,000 RFID readers already used in Shanghai Metro's mass transit system. Running the wire to connect a SIM card with an antenna, as Watchdata has done, makes the card more fragile, he added.

To overcome such limitations, Quanray created a patented hardware approach that can “penetrate the battery,” Hao said. Further, because it's based on a 13.56- MHz SIM card, it can “leverage the existing infrastructure” to create additional mobile contactless payment features. Quanray’s solution offers a bridge to connect readers and SIM cards.

“The bridge is passive so that it functions without [a] battery, and it can wirelessly communicate with SIM and reader,” Hao explained. The bridge can be placed either at the phone’s battery cover or atop the reader. “Currently, our users are placing the bridge at the reader side [just like a sticker], so that a mobile user can simply replace his SIM card,” he added.

How does it stack up?

When comparing an NFC-integrated phone with a SIM card solution, the performance of the NFC-embedded phone “will be better because of the large antenna,” Hao said. Applications also will be broader since “an NFC phone can work at tag mode, reader mode and P2P mode. But a SIM-based NFC can only work at tag mode.”

That said, SIM card solutions will work for such applications as payment, ticketing, identity and access.

The NFC SIM card also will work with existing phones, with transaction security controlled by the SIM card instead of the phone. The approach uses existing infrastructures (ISO 14443) in application systems, while it updates, downloads, enables and disables operation over the air, according to Quanray.  
How Quanray got started
Hao's pedigree is ideal for heading a Chinese startup: He’s well connected with academia, here and in the U.S., as well as Silicon Valley and the Chinese government. He started as a professor at Fudan University, where he still teaches, then went on to direct China’s State Key Lab, a premiere research organization, from 1998 to 2005. He spent 2 ½ years in the U.S. as a visiting associate professor at Stanford University and started two companies while there. Back in China, Hao ran Shanghai Huahong Integrated Circuits Co., a government-funded IC design house that makes smart-card chips.

Hao helped launched Quanray in 2005 along with two friends and three Fudan University grad students. They pooled their own money – 1 million RMB in total – to fund the company while the three students agreed to work for low pay after graduating.

Armed with UHF and HF RFID hardware solutions, Quanray has been supplying chips in China and abroad. The UHF chips are used by a Japanese company for object tracking, while a European company is using Quanray’s HF chip for ticketing, Hao said.

Quanray’s notable design wins in China include supplying chips to China’s high-end liquor company, Wuliangye. A chip in the label of each bottle proves it authenticity, a classic anti-counterfeiting application.

Currently working on a second round of funding, Quanray is hoping to catch a break with its SIM card chips through its partnership with China Mobile. The carrier will begin trials this fall targeting 50,000 students on a campus in Sichuan province.

About 25,000 SIM cards integrated with RFID technology have already been issued, said Hao. Because the chips are relatively cheap, Quanray won’t see an instant revenue bump, but “this model can be duplicated” beyond the China Mobile trials, Hao insisted.

“When it comes to the production technology, we still have a distance to go, especially when we compare ourselves with the leading UHF chip suppliers," he added.

Indeed, Impinj and Alien Technology, the top two UHF RFID chip startups in the U.S., have yet to pull off successful IPOs (they both scrapped their plans in recent years), the odds for success at a tiny RFID chip company based in Shanghai may be small. Still, Hao listed several factors working in his favor: Quanray’s ability to offer a complete RFID solution; lower cost structure (margins of less than 40 percent); and the company's knack for unique solutions like the patented RFID-integrated SIM card.

Current leading UHF RFID vendors like NXP, Impinj and Alien are far ahead of Quanray. If all three features mesh, concluded Hao, “We think we can catch up.”

Shanghai Quanray




Email:              marketing@quanray.com



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