A broad mass market
FPC’s main market is currently biometric solutions for smartphones and tablets. The company’s offering is also considered to have promising potential as embedded system solutions in a wide range of applications.
See the following examples:
- Smartcards (primarily charge/credit cards, but also ID cards, access cards and public transport passes),
- The automotive industry
- The Internet of Things
- Physical access – the lock industry
- Wearables – watches, bracelets
- The healthcare sector – physical access to medicine cabinets, wards, logging in to medical records systems
- Banking and finance – logging in, registration of transfers
- The public sector – visas
- Login devices – integration into USBs
Driving forces for biometrics
Initially the introduction of fingerprint technology was driven by convenience and security when logging into smartphones. There are several advantages: no PIN codes, immediate unlocking, verification and functions (taking pictures, opening apps, etc.)
A maturing biometrics ecosystem is rapidly emerging. Increasing numbers of players are approving biometric verification for payments, over the Internet or in stores. These players include Alipay (China), Apple Pay, Android 6.0 including Android Pay, PayPal, Microsoft and FIDO (Fast IDentity Online) certified technology. The smartphone payment system is especially evident in China, where it is commonly used instead of charge/credit cards.
Smartphones with biometric features also have great long-term potential in an “unbanked” world, i.e. in countries where a large share of the population does not have a bank account and the bank branch infrastructure is extremely sparse.
Implementation is also driven by convenience and security in other applications, as is apparent from the accompanying list.
The smartphone is a mass market
The smartphone volume is currently the largest mass market targeted by FPC, while other markets will be added going forward.
Unit volume growth in the global smartphone market has been extremely strong but is expected to slow according to consulting firm StrategyAnalytics, from a very high rate of 70 percent in 2010 to about 17 percent in 2015, continuing down to about 4 percent by the end of the current decade.
The trend in penetration of fingerprint technology is the opposite, with low penetration of about 17 percent in 2014 expected to increase to about 85 percent by 2018 according to FPC’s assessment, which incorporates data from IHS. Apple, which introduced fingerprint technology on a large scale, was the dominant player in 2014. However, FPC’s market consists of smartphones based on Android and Windows-based operating systems. These two operating systems are expected to experience strong growth from 2016 to 2018 and to dominate smartphones equipped with sensors, with an 85 percent share by 2018. Apple makes up the remaining 15 percent.
Fingerprint technology was initially introduced in the high-priced smartphone segment.
FPC expects this pattern to continue, and expects the technology to be rapidly introduced in the medium and low-price segments.
Source: FPC’s assessment and StrategyAnalytics (re: Apple).
The touch sensor dominates
When sensors were introduced in Android smartphones, swipe sensors were used. Now the touch sensor dominates the market, and it is expected to continue to do so in the future.
FPC’s market share encompasses a large number of OEMs
Apple led total smartphone sales in 2015 with a market share of about 23 percent, followed by Samsung with about 16 percent. In terms of volume, FPC’s customers are primarily located in Asia, especially China. The company’s market share for fingerprint sensors in the Android/ Windows segment, in terms of market value, was 45 percent in 2015 and is expected to rise to 50 to 70 percent in 2016.
Slower growth in tablets
Tablets with biometrics have a lower growth rate, due to a slower pace of innovation/development and lower sales of tablets, which is believed to depend on usage habits. The tablet is more stationary, and generally has more users per unit. The penetration of fingerprint sensors in tablets has not reached the same level as in smartphones, but it is expected to begin rising over the next few years as secure e-commerce payments are introduced.
Embedded system solutions – vast potential
Fingerprint technology is expected to become widespread in other market segments as embedded system solutions. FPC estimates that by 2018 the market potential for embedded system solutions, smartcards, the Internet of Things etc. will be nearly as large as the market for fingerprint sensors in smartphones was in 2016.
According to the American consulting firm Technavio, the market for biometric access solutions in Europe, North and South America and the Middle East/Africa is expected to show annual average growth of 18% from 2015 to 2019. They attribute this significant growth to the transition from non-biometric technologies such as PIN codes and smartcards (without biometrics).
The most established biometric technologies in the field are iris and fingerprint recognition. Technavio defines the market as government authorities, the banking/finance/ insurance sector, transportation and the healthcare sector. This growth is driven by the rising threat of fraud and cyber crime. According to Technavio, the global banking groups have begun integrating biometric security solutions, and smartphones are expected to be the most popular tool for users to gain online access to their bank accounts.
The automotive industry
The automotive industry’s volumes for new production are lower than smartphone volumes, but this industry is also a mass market.
However, the degree of refinement and system value are significantly higher. FPC sees promising potential to deliver biometric systems with greater value, and thus higher margins.
In FPC’s view, the automotive industry has now decided to integrate fingerprint sensors into their products.
It generally takes a long time to establish a position as a supplier to this market, and the company expects penetration to start from a low level.
The suppliers that establish a leading position early on will be in a position to drive revenue for many years, which is why this market is an excellent complement to the smartphone market for FPC.
The competitive landscape
FPC is seeing increasing competition in fingerprint biometrics. The competitive situation
is not comparable with that of commodity semiconductor manufacturers. The company operates in the specialty semiconductor field, where there is continuous progress and new differentiated solutions continuously arrive.
It is possible to make comparisons with the market for smartphone camera sensors, where there are three main manufacturers: Sony, Samsung and OmniVision (a NASDAQ- listed US firm).
FPC does not view Apple as a potential market because Apple has its own developer/ manufacturer for the iOS operating system (through the 2012 acquisition of Authentec). Accordingly, FPC does not take Apple’s share of the smartphone/tablet market into account in its market and competitive evaluation.
A strong market position
According to the consulting firm IHS, FPC was the largest company in the market for fingerprint technology in smartphone/tablets in 2015, with a market share of slightly more than 50%, excluding Apple’s iOS-based sensors. Synaptics accounted for 40%.
FPC faces competition primarily from the following companies that mass produce proprietary products:
Synaptics, listed on the NASDAQ exchange, American manufacturer of touchscreen and fingerprint solutions for PCs and smartphones/tablets.
Goodix, a privately owned Chinese manufacturer of touchscreen and fingerprint solutions.
Egistec, listed on the Taipei exchange (in December 2015), a Taiwanese fingerprint sensor manufacturer.
In addition to these companies, several players have announced that they are offering fingerprint solutions. However as far as FPC is aware, none of them had begun mass production by the end of 2015. These players include the US NASDAQ-listed firm Qualcomm, the Chinese firm Silead and the Norwegian firms IDEX and Next Biometrics.
Qualcomm’s fingerprint technology is based on recognition using ultrasound