Apple Inc.'s Touch ID Troubles

By Ashraf Eassa Markets Fool.com

Analyst Andy Hargreaves with Pacific Crest, in a research note obtained by MacRumors, offered some commentary with respect to the Touch ID situation for Apple's (NASDAQ: AAPL) upcoming iPhone.

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As readers may be aware, Apple's iPhone 8 is widely expected to have a Touch ID sensor embedded underneath the display itself, rather than underneath a dedicated home button. Readers may also be aware that rumors continually swirl about Apple potentially facing serious difficulties in getting this technology into volume manufacturing.

Image source: Apple.

Let's look at what Hargreaves had to say.

A tale of two options

Hargreaves says that Apple "continues to work on solving its optical fingerprint issues." If Apple can work out the kinks "in the next month or so," the analyst says, then Apple "would likely place volume orders at that point." Hedoes note that even if Apple does get it all sorted out within the next month, this would still necessitate a "delay of the OLED iPhone launch." The silver lining, according to Hargreaves, is that such a delay wouldn't "meaningfully affect volume [shipments] for the [product] cycle."

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However, if it can't get these issues worked out, then "Apple may be forced to eliminate fingerprint sensing from the OLED iPhone altogether."

Goodbye, Touch ID. Hello, 3D sensing?

In the case that Apple does, in fact, eliminate Touch ID from the OLED-based iPhone 8, Hargreaves argues that the rumored 3D sensing functionality that's expected to be coming to this device could serve as a "viable and innovative replacement for the highly popular fingerprint sensor."

Indeed, Hargreaves says, citing "suppliers," that the 3D sensing technology "is both fast and highly reliable, even in low-light scenarios or from odd angles."

Foolish take

To be blunt, I'm not convinced that this potential 3D sensing technology can really serve as a general-purpose replacement for Touch ID.For example, Hargreaves says that the 3D sensing tech works well in low light, which is certainly nice, but what about situations in which there's practically no light? Can the 3D sensing solution remain "fast and highly reliable" even in that case?

Even if Apple were to solve that problem, there's still the huge issue of convenience, particularly vis-a-vis Apple Pay (a point that Cowen and Company analyst Timothy Arcuri briefly mentioned in his own note discussing Apple's Touch ID woes).Today, Apple Pay works by having the user hold her or his phone up to the reader and then touching the fingerprint sensor.It's simple and convenient, which is probably one of the major reasons that Apple Pay continues to gain traction.

How would customers use Apple Pay using the 3D sensor? Would a user need to explicitly load the Apple Pay application, stick his or her face in front of the front-facing camera, and then once the image is captured, move the phone near the reader?This sounds much less convenient and, frankly, probably more annoying than just pulling out a credit card and swiping it or sticking it in a chip reader and signing the screen.

In my view, Apple must include Touch ID on the OLED iPhone, especially if the "standard" iPhone 7s and 7s Plus include it (lack of Touch ID could drive potential iPhone 8 customers to buy a cheaper iPhone 7s or 7s Plus instead).

At this point, I'm hopeful that Apple figures out the issues with its in-screen Touch ID solution, but if it can't get it to work in time, I'll be interested to see what Apple ultimately ships.

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Ashraf Eassa has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Apple. The Motley Fool has a disclosure policy.