INTERNATIONAL – Europe’s last major maker of fingerprint sensors for smartphones is sticking with the business, even after cutthroat competition from Asian rivals pushed its shares into a nosedive over the past two years.
Fingerprint Cards AB weathered the storm after a pile of competitors started making biometric sensors for phones when they became standard in the devices a few years ago, chief executive Christian Fredrikson said in an interview at the company’s headquarters in central Stockholm.
“We’ve built an incredibly good access in the mobile business, and while many of our competitors have left the industry, we intend to stay,” Fredrikson said.
The intense competition and price pressure prompted other European and US manufacturers to abandon the business. Touch-pad technology maker Synaptics told investors on August 9 that it was shifting investment from mobile fingerprint to higher growth Internet of Things, or internet connectivity for everyday devices. On top of that, it also decided to restructure its optical fingerprint business for mobile.
Still, Fredrikson said Fingerprint Cards must diversify its product offering by growing in iris recognition and pushing its sensors out to new segments, such as access technology for cars and homes as well as smartcards and payment solutions. The rise of Internet of Things also offer vast opportunities, he said.
The company’s investors are a hardened crowd. While the stock soared more than 1 500 percent in 2015, all those gains have now been erased after Fingerprint Card’s heavy reliance on mobile phones lead to a string of profit warnings and a slump in sales. The company was booted out of the benchmark Swedish OMX Stockholm 30 Index this year after volumes slumped amid a drop of 60 percent in the price of its shares in the first five months of this year.
New product categories promise to be less volatile than phones, which consumers rapidly swap for newer devices from manufacturers who change components frequently. These segments will also let the company diversify more beyond Asian markets and reduce its reliance on fingerprint readers for smartphones, Fredrikson said.
The chief executive is targeting at least 10 percent of sales from those other segments this year and predicts that share will rise as card manufacturers add biometric-sensor technology and as more carmakers start using iris-recognition in vehicles. Fredrikson expects smartcards to get their breakthrough next year, while biometrics in the automotive industry is likely to start taking off in 2020-2021.
"Further down the road we want to be more of an all-round biometrics company with at least three legs; mobile, payment systems and access," he said. "At least two of those segments need to be about equal in size, so as not to be so dependent on the mobile industry."
Fingerprint Cards stands to benefit from the mounting trade conflict between the US and China, which may hurt rivals more than it will a manufacturer from Sweden, Fredrikson said. In payment cards using fingerprint sensors – one of the biggest growth prospects – the chief executive is betting that the leading makers of such cards, from France, will be more likely to choose a European supplier.
While mobile will remain one of Fingerprint Cards’ biggest business areas by volume, payments solutions will grow to become an equally important segment, Fredrikson predicts. Access technology, such as sensors on doors, on suitcases and in cars, will be a smaller business area than the other two, but more profitable.
“The potential smartcard volume is at least equivalent to that in the mobile phone industry,” Fredrikson said. “The third leg that we talk about, access, is much smaller in volume, but the price levels are different.”
Analysts don’t predict much impact from Fingerprint’s thrust into new categories for the foreseeable future. The average estimates is for sales to almost halve to 1.5 billion kronor (R1.5bn) this year, after declining 55 percent last year. Revenue is then predicted to remain largely unchanged at this year’s level in 2019 and 2020.
Investors are more confident: the stock has gained almost 80 percent since the end of June, mirroring Fredrikson’s optimism for the company he describes as “the last of the Mohicans” among non-Asian suppliers to that region’s smartphone makers.
"We’re in a nice position, but one has to earn that position every day,” Fredrikson said. “There are many hungry companies that want to take your lunch.”