Fingerprint Cards AB

Interim report January-September 2017 - Seite 2

When it comes to the market, there were a number of concurrent technological trends and uncertainty factors that caused our Chinese OEM customers to adopt a highly cautious approach during the quarter. As a result of this uncertainty, our customers have opted to shorten their planning horizons and component inventories in the value chain have decreased from normal levels. We are also seeing signs of consolidation in the value chain. This impeded market growth and our deliveries during the quarter. For example, we are seeing a trend toward smartphone screens that cover the entire front of the device and many OEM customers are therefore looking to move the fingerprint sensor to the back of the phone. Back-mounted sensors are sold at a lower price which - in combination with the general price pressure -  has resulted in a decline in the average selling price (ASP). The rate of decline in ASP amounts to approximately 30 percent annually for 2017. Looking at the fourth quarter, I expect our overall delivery volumes to decline compared with the third quarter due to seasonal effects in the component industry.

Our OEM customers are also evaluating other technologies, such as the possibility of fully integrated in-display fingerprint sensors. As of yet, there are no commercial in-display solutions suitable for mass production, but we are engaged in a number of development projects in the area. Iris and face recognition are also being evaluated as alternative biometric methods.

We are seeing no signs that our OEM customers plan to replace the fingerprint sensor with other solutions. Instead, there is talk of offering complementing biometric methods for authentication, known as multimodality. Our iris solution would work well in such a scenario, and our major OEM customers and customers in other segments have expressed significant interest in this possibility.

Fingerprints' market position remains very strong. During the quarter, 27 mobile devices equipped with our sensors were launched and we announced the first product launch of FPC1028, a high-performance, cost-efficient sensor.

Fingerprints' smart card offering is attracting considerable and growing interest, even though it will take time for market volumes to become comparable with those we are currently seeing in the smartphone market. As the only player in this space with extensive experience in the mass production of sensors, Fingerprints has a very strong starting position in the promising smart card market.  During the quarter, we took the next step toward high-volume production of Fingerprints' smart card sensors through the launch of the new module design T-Shape(TM). We also joined the standardization work being carried out by Eurosmart and announced that our sensors will be used in AirPlus's pilot project for contactless payment cards.