Biometrics – an increasing part of everyday life
Fingerprints operates in markets with distinct growth potential. In terms of volume, smartphones and tablets continue to grow. The company also focuses on new markets such as smart cards, PCs, online devices and the automotive.
Fingerprints regards biometrics as a reliable and conveinient authentication solution that is currently just beginning to become significant as a broader application. Growth can be divided into three eras:
The first era is where biometrics is established in a platform, the mass-market product smartphones. Functionality has initially comprised unlocking and other security features in the phone.
The second era is characterized by increased confidence in biometric technology and more applications are added, such as secure payments. Application of biometrics in additional devices such as smart cards.
The third era is when biometrics is a natural part of everyday life. Here biometrics is used on a broad scale in multiple applications, in several devices with more applications and with a number of interacting biometric systems for satisfying more stringent security requirements.
Trends that impact everyone
Biometrics can be considered as a disruptive technology that enables new business models and areas of use. Its emergence is being affected by both distinct immediate drivers and broader trends.
REPEATED TECHNOLOGICAL LAUNCHES
The technological penetration of fingerprint sensors in a smartphone is expected to follow the same pattern as other earlier technologies with a rapid impact over the course of
a few years.
Adaptation to biometrics
Users are increasingly becoming accustomed to the use of biometrics and the number of users will have a strong growth.
Security and convenience
The need for strong authentication is increasing in pace with digitalization. At the same time, recognized that increased security should not
be a threshold for smooth use, as convenience is equally important.
Storage of data and access to services via the cloud is impacting the business models in many operations and increase the security demands, as more end-users are utilizing cloud based services.
Transactions over internet are continuing
to increase and are spreading to new users. Security becomes a prerequisite to increase the willingness of using online payment.
Digitalization and internet
– more online devises.
As online devices requiring log-ins increase, the need for a multitude of pin codes and passwords.
BIOMETRICS – MORE TECHNOLOGIES
Fingerprints bases its current biometric technology on reading the fingerprint by using capacitive sensors. The company believes that other biometric technologies, modalities, will
be introduced in future. The fingerprint can also be scanned using other methods whereby optical sensors are being further developed and ultrasound will be introduced. Eye recognition, which is considered to offer great security, is another oppor- tinity. By combining several modalities such as fingerprint sensor and eye recognition, double authentication systems, multi-modalities, are created with further enhanced security.
EYE RECOGNITION NEW FOR CONSUMERS
Eye recognition is based on the unique patterns of the eye, either the iris, the blood vessel pattern in the retina or the vein pattern in the sclera.
The eye recognition biometrics is beginning to be introduced in smartphones. Initially, it is the vein recognition of the sclera that is applied. The method uses the smartphone’s existing camera. The level of reliability is however unclear. Iris recog- nition is considered to have a higher reliability. It has initially been used by governmental institutions and is now being introduced in smartphones.
The application of eye recognition is expected to increase in smartphones over the coming two to five years. The method is also believed to be part of combined biometric solutions together with a fingerprint sensor for improved convenience and higher security.
BIOMETRICS CREATES NEW BUSINESS MODELS
Smooth authentication and payment features enhance both security and convenience and are becoming a prerequisite, not only a differentiating feature, for the business models of platform and e-commerce operators.
To pursue the advancement of biometrics, Google, Microsoft and Amazon, among others, are developing their own ready- to-use concepts, including hardware, in which their services can be demonstrated.
INTERACTION BETWEEN THREE PLAYERS
The biometrics market for e.g. smartphone and smartcard is based on interaction between three players:
• Manufacturers of smartphones and smart cards
• Platform/operating system players – Google (Android) and
Microsoft (Windows) as well as
• Standardization bodies, both state-operated and industry associations, as well as private players, are cooperating to create joint standards – such as ISO, Fido, Global platform, EMVCo and AADHAAR.
INCREASED PENETRATION RATE FOR SMARTPHONES
Fingerprints’ addressable smartphone market, excluding Apple, consists of smartphones and tablets, based on Android and Windows operating systems. This market is estimated
to grow, in terms of the number of devices, in pace with the increase of the penetration rate for fingerprint sensors, from slightly more than 600 million devices in 2016 to 1.5 billion devices in 2020. Total growth in produced smartphones is expected to rise from 1.27 billion in 2016 to approximately
1.6 billion in 2020, with a diminishing growth rate during this period. At the end of 2016, the penetration rate in Fingerprints addressable market was nearly 50% and it is estimated to amount to nearly 95% by 2020. All newly produced Apple Iphones and Ipads will had fingerprint sensors as the standard by the end of 2016.
By comparison, the addressable tablet market has sig- nificantly lower volumes, 10 million devices in 2016, but is
estimated to grow to approximately 100 million by 2020.
lthough the market value is difficult to estimate, Fingerprints assesses that the average sales price (ASP) per sensor will continue to decline. This is a result of the general pricing pattern for solutions featuring new technologies, which show declining pricing over time as the supply and competition increase. The assessment is that the ASP will decline by about
15–20% in 2017.
INCREASING PENETRATION RATE FOR PCS
The PC market is also driven by secure authentication, in particular for logins and payments. The addressable market amounted to 40 million devices in 2016. Here too the penetra- tion rate is expected to increase and to exceed the addressable market of slightly more than 200 million PCs by 2020.
SMART CARDS A COMING MASS MARKET
Fingerprints’ definition of the smartcard market is all plastic cards equipped with a chip. In 2015, the volume of newly produced cards totaled approximately four billion, of which charge cards accounted for three billion. Half of the newly produced cards feature a dual interface. The other volume largely consists of access cards, to open doors and logging
in etc. The total volume of charge/credit cards in circulation in 2015 was slightly more than 10 billion.
Four main players
Card manufacturing is dominated by three major manufacturers that account for 70% – Gemalto from the Netherlands, Oberthur Technologies (Safran/Morphy) from France, Giesecke & Devrient from Germany,
Charge cards are issued by the banks which have agree- ments with credit companies as transaction mediators. Visa, Mastercard and China UnionPay account for 97% of the market.
A fourth player is the chip suppliers to the cards. This market is also dominated by a few players: NXP, Infineon and ST,
which jointly account for 90% of the marketStandardization of charge/credit cards
Standardization and certification of charge/credit cards
Standardization and certification of charge/credit cards featuring fingerprint sensors are mainly driven by the certifi- cation body EMVCo. Standardization is a prerequisite for the market for smart cards with a payment function and biometric verification should be able to take off.
Access cards closer in time
According to Fingerprints, the market for access cards will emerge closer in time, since these are not subject to the same standardized security requirements. In the near future, Fingerprints therefore intends to address this market. The market is being driven by a need to use biometrics to replace
the pin code feature and/or only the signal from a card, in order to enhance security and ensure that it is the right person who gets access.
The market for Fingerprints’ embedded system solutions for online devices, also called IoT – Internet of Things – encompasses a growing range of applications. It consists of everything from smart watches to smart homes and other devices should be able to communicate via the Internet.
Vehicles partly belong to this category but can also have local applications for customize driver comfort and for entertain- ment. Accordingly, it is anticipated that vehicles will have several different biometric sensors for various purposes. The introduction of biometrics into vehicles is expected to start in the upper price segment, which in 2016 represented approxi- mately 5 million of a total of 80 million vehicles.
Although it is difficult to predict the market volume for on- line devices, the company estimates that this is a coming mass market that could eventually reach levels of 3–4 billion units.
STRONG MARKET POSITION WITH INCREASED COMPETITION
During 2016, Fingerprints was the market leader for finger- print sensors in smartphones, with a market share (excluding Apple) of 55–60%, followed by Goodix and Synaptics, which jointly accounted for some 35%. Fingerprints assesses that the company will continue to be the market leader with a market share exceeding 50%.
Fingerprints foresee increasing competition in fingerprint biometrics. Customers apply increasingly dual sourcing, the use of at least two suppliers to safeguard production. In the company’s opinion, competition will remain and a number of minor competitors will be eliminated. A comparison can be made with the market for smartphone cameras, where three main manufacturers remain after the new technology has been fully established.
Fingerprints faces competition primarily from the following companies that mass produce proprietary products:
Goodix, which was listed on the Shanghai stock exchange in
2016, a Chinese manufacturer of touchscreen and fingerprint solutions, with some 800 employees. This company sales in
2016 amounted to nearly RMB 2 bn.
Synaptics, listed on the NASDAQ stock exchange, an American manufacturer of touchscreen and fingerprint solutions for
PCs and smartphones/tablets. Samsung’s main supplier with approximately 1,100 employees. This company sales in 2016 amounted to USD 1,667 M.
In addition to these companies, a number of sensor producers are attempting to penetrate the market, although with volumes that are much lower than Fingerprints, Goodix and Synaptics.