Sweden's Fingerprint Cards (FPC) sees biometric smart cards -- those
using fingerprint identification -- becoming its fastest growing
market as early as 2018, having already become the market leader in
a crowded sector for supplying such sensors for smartphones.
Others within the industry are not convinced the smart card business
will take off so quickly, prompting questions about whether FPC can
maintain its runaway rise in valuation.
FPC's share price surged around 1,600 percent last year as demand
for fingerprint sensors in phones soared after Apple, which uses its
own in-house supplier, helped to popularize the technology. FPC now
has a market value of around $4.1 billion.
Advocates say the technology offers greater security and simplicity
when compared to techniques such as using pin codes to confirm
identification.

The fingerprint sensor business has a handful of companies supplying
significant volumes today, with an equal number planning to enter
the market. Three are based in the Nordic region where technology
companies have thrived.
Needing to maintain its momentum, FPC says it is in initial talks
with potential big customers for smart cards. It declines to name
names at this stage.
"Our ambition for smart cards, and all other segments, is that we
shall continue to be number one," FPC's Chief Executive Jorgen
Lantto told Reuters.
Silicon Valley firm Synaptics, the closest rival to FPC in sensors
for smartphones, is more cautious on new markets.
"It's hard for me to project market share in a segment of the market
(when) we're not sure when it's going to happen," said Anthony
Gioeli, vice president of marketing in the biometrics division of
Synaptics.
Sascha Behlendorf, a card systems product manager at Germany's
Giesecke & Devrient, one of the top three smart card makers, expects
widespread adoption of biometrics in smart cards could take some
five to 10 years.
RANGE OF USES
Gothenburg-based FPC has been around for almost two decades,
building a technology business based on an old Swedish
fingerprinting patent. That left it well placed when the market
expanded and it has also benefited by hiring staff from Nokia and
Ericsson as their mobile phone businesses declined.
Analysts say expectations for new markets have helped to underpin
the huge leap in valuation for FPC.
However, Carnegie analyst Havard Nilsson this week cut his
recommendation for FPC to "sell" from "hold", citing what he called
unwarranted share price appreciation and repeated his target price
of 450 crowns. The shares traded at 524 crowns on Thursday.
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"Given that smartphones should constitute 60-70 percent of the
global addressable market (in 2020), we do not believe new
verticals, such as smart cards, will be able to compensate for
competitive pressure in consumer electronics," Nilsson wrote.
He sees earnings per share peaking at 37 crowns in 2018.
Beyond payments, biometric smart cards could be used to allow access
to buildings and IT-systems, according to FPC. Keyless entry to cars
is another potential major market, as are wearable products such as
watches or wristbands serving as a substitute identity card. FPC
includes such applications in its forecasts for "other segments" of
business.
FPC sees a total addressable market for this part of its business of
roughly 100 million sensors in 2017 and around 500 million in 2018.
It is the only player so far to make specific forecasts for these
new markets.
"We talk to a lot of players and companies come to us. There is
substance behind our numbers," Lantto said, adding that FPC has held
talks with a handful of big potential smart card clients since last
autumn.
Most suppliers of fingerprint sensors, including FPC, use 3D imaging
technology for recognition of a fingerprint, while Next Biometrics
in Norway uses heat sensing technology.

IDEX, another Norwegian competitor, roughly shares FPC's forecasts
for segments beyond smartphones for the coming few years, Chief
Financial Officer Henrik Knudtzon said.
IDEX, which last summer entered a partnership with an unnamed global
payments company for biometric applications, is integrating its
sensors into smart cards with partners and expects shipments to
start toward the end of this year, Knudtzon said.
(Reporting by Olof Swahnberg; Editing by Eric Auchard and Keith
Weir)
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