When Apple introduced Touch ID in its iPhone 5s, it proved to be a very impressive and convenient piece of technology. It actually workedand went on to become a key differentiator in a crowded smartphone market. The first major device to offer a competitive solution to Touch ID is the SamsungGalaxy S6, which likely features aSynapticstouch area sensor.
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However, Qualcomm just announced a competing technology of its own: Snapdragon Sense ID.
Qualcomm says Sense ID is better -- and coming soon
According to Qualcomm, Snapdragon Sense ID is a more robust fingerprint identification solution than those currently offered by Apple and Synaptics. The company claims that its technology uses "3D ultrasonic imaging" which allows for "more innovative and elegant industrial design options for device manufacturers" as well as increased accuracy and convenience.
The company also expects that the first devices incorporating this technology will hit the market in the second half of 2015. Unless Apple totally revamps Touch ID for the next iPhone, Qualcomm will be supplying all Apple competitors with what seems to be an even better technology than Touch ID.
Qualcomm is trying to commoditize the smartphone market
The key thing to notice here is that while Qualcomm is a supplier of cellular baseband chips to Apple, Qualcomm would obviously prefer its other customers -- which buy fully integrated applications processors and baseband chips -- to take market share.
More broadly, Qualcomm wants to provide as much of the "hard stuff" to smartphone device vendors, so that it can extract as much of the value from these devices as possible. The OEMs, if Qualcomm succeeds, essentially make very little money as they are selling a commodity product with much of the internals supplied by Qualcomm chip teams.
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This is exactly what Inteldid in the PC market, and it is clear looking at how much profit the company has been able to extract from selling PC chips and related platforms -- and how little the actual PC vendors make -- that this strategy works, and it works really well.
Apple is still the safest vendor
Even if all of the hardware features that Apple brings to the table ultimately end up commoditized (and I suspect that Qualcomm is working hard to make that happen), Apple does benefit from a number of advantages that other vendors do not enjoy.
Apple owns and controls iOS, the app store, and iTunes. Owning an ecosystem and making it a pleasant experience is a great value-add. All of the other relevant smartphone vendors sell products based onGoogle Android, so none of them have the ability to "lock in" customers as Apple does.
Additionally, Apple has an incredible brand and solid retail presence. There is value in having Apple stores all over the world (particularly for warranty purposes as well as general troubleshooting), and of course, the "iconic" brand, as many would undoubtedly describe it, adds a lot to the appeal of owning these products.
So while I think that at some point, smartphone hardware becomes more or less a commodity -- even at the high-end -- Apple seems the "safest" of all of the vendors from the price and margin erosion that commoditization entails. Whether it can keep hitting record revenues and profits every year for the foreseeable future is a question that will generate heated debate for many years to come.
The article 1 More Way Qualcomm Inc. Is Challenging Apple Inc. originally appeared on Fool.com.
Ashraf Eassa owns shares of Intel and Qualcomm. The Motley Fool recommends Apple, Google (A shares), Google (C shares), and Intel. The Motley Fool owns shares of Apple, Google (A shares), Google (C shares), and Qualcomm. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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