December 11, 2017 -
This is a guest post by Anthony Kimery, Former Editor-in-Chief, Homeland Security Today.
Fingerprint Cards AB (FPC), which develops biometric systems that let consumers use their fingerprints to unlock mobile phones and other devices, two weeks ago, took the unusual step of talking down its share price.
On November 23, Fingerprint Cards CEO and Chairman Christian Fredrikson said the company had been approached by an investor but did not expect negotiations to result in an investment. The stock declined, giving up about half of the previous day’s 37 percent increase to the23 Nov closing price of 19.35 SEK. Since then the shares have continued to decline, closing at 16.62 SEK, below the opening price on November 22, the day before reports about the talks.
While Fingerprint Cards declined to name the potential investor, Sweden’s Dagens Industry reported China’s Watertek is the interested party, without saying if it was seeking a controlling stake.
Both Chen Jiangtao, chairman of Beijing-based Watertek and leader of a financial group purported to be interested in acquiring FPC, and Apollo Hu of FPC China have remained silent.
If FPC is deliberately discouraging a potential suitor, it could be missing an opportunity.
China is FPC’s biggest market, even after the emergence of local Chinese rivals such as Goodix eroded FPC’s market share, pushing down FPC’s stock by 70 percent since the start of this year to levels last seen in 2015.
Goodix, also known as Shenzhen Huiding Technology, claims to be the biggest fingerprint authentication solution provider for Android phones globally. In the market for fingerprint sensors, Goodix’s market performance is catching up to market leader FPC.
Just a year ago, Goodix was relatively small, with few big-name customers.
It is the second largest fingerprint sensor supplier after Fingerprint Cards, (excluding iPhones), according to research company IHS. It offers in-display fingerprint solutions used in smartphone models that will be launched by several mobile manufacturers in 2018. Goodix also is researching and developing 3D face detection.
According to Shanghai Intellectual Property Court, intellectual property lawsuits are on the rise in China. And if an intellectual property lawsuit between FPC and Goodix happens, it could disrupt orders from major customers and acquisition values.
FPC wants to expand and maintain its leadership position within the growing world market for biometric technology. Earlier this year, it acquired Delta ID so it could provide multi-modal solutions. Combining iris recognition technology with its fingerprint sensors means products are more secure and user-friendly. FPC has just connected Fingerprint and iris modalities on the same phone in Japan for the first time.
Not having the capital to compete inevitably spells trouble for FPC, as it has an ambitious tech vision and needs investment to make it happen. However, Watertek Group would have more than just cash to contribute to FPC. There is synergy between the two company’s’ strategic visions. Like the CEO of FPC, Watertek also envisions becoming a platform for building smart services for smart cities. It also has valuable local knowledge of the Smart Cities market in China, and spatiotemporal big data technologies that bridge the physical and cyber worlds enable secure data processing.
FPC has long recognized the importance of the Chinese market for biometrics applications. In 2013, it was smart enough to open an office in Shanghai to develop sales and support current distributors in the region in their sales efforts. Recently, FPC established partnerships with two China-based module makers, Fingerchip and A-Kerr to help it remain competitive in this rapidly developing industry.
Fredrikson, according to a video on November 1, said he thinks multimodality is just the beginning. He envisions a host of additional applications for biometrics, including smart credit cards that only work when account holders validate transactions with their fingerprints.
A Chinese strategic partner like Watertek is essential to FPC realizing its vision of providing cloud services with repeat revenue. To succeed in embedding identity services into smart cities and applications that leverage IoT at scale, FPC will need not just cybersecurity technology, but also the ability to partner with and, perhaps, even acquire the multiple specialized solution providers vying for the choices applications in banking, retail and mobility.
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