On Dec. 12, Synaptics (NASDAQ: SYNA), a company that's bet heavily on building and selling fingerprint scanning technology for use in smartphones, announced that it has gone into mass production on a new in-display fingerprint scanning product known as the Clear ID FS9500 -- a technology that it began sampling earlier this year.
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The company says that the technology is being adopted by a "top five OEM" -- in other words, one of the top five smartphone manufacturers. That manufacturer is likely Vivo, which demonstrated a smartphone with an in-display fingerprint scanner earlier this year.
Synaptics' pitch for this technology is that it "allows users to securely unlock the device in situations including while it's sitting on the table, at any angle, or while in a car mount."
This statement is undoubtedly a shot at facial recognition solutions, such as Apple's (NASDAQ: AAPL) Face ID, that have emerged as alternatives to fingerprint scanning, particularly for devices with nearly bezel-free displays.
Let's take a closer look at what this technology could mean for Synaptics' business.
Some good and some bad
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The good news is that Synaptics seems to have a good solution here -- in-display fingerprint scanning is certainly preferable to a fingerprint scanner in the rear of a device, and I don't doubt that in the near term, Synaptics will see reasonable adoption of this technology by some smartphone manufacturers.
Unfortunately, there's quite a bit of bad news as well.
First, Synaptics isn't the only company that's planning to roll out an in-display fingerprint scanning solution. Qualcomm (NASDAQ: QCOM), which dominates the market for mobile processors, has said that it intends to introduce its own in-display fingerprint scanning technology by the summer of 2018.
Qualcomm may be later to market, but since it already sells many of the chips that go into premium phones, it could have an easier time capturing demand for such solutions than Synaptics will.
Perhaps a bigger challenge to Synaptics' in-display fingerprint scanning technology, though, is that Apple seems to be steering the industry away from fingerprint recognition altogether in favor of facial recognition.
Remember, many of the premium smartphone manufacturers that compete with Apple try their best to copy and, in some cases, extend Apple's technological direction. For example, Chinese smartphone manufacturer Huawei -- which has been quite public about its ambition to one day become the world's largest smartphone vendor by unit shipments -- mocked Face ID technology when it teased its then-upcoming Mate 10 smartphones but then shortly thereafter began hyping its upcoming clone of Face ID.
I have little doubt that Oppo, Vivo, and Samsung (NASDAQOTH: SSNLF) -- three of the top five smartphone vendors -- will also follow Apple's lead in due course (though there have been rumors that Samsung intends to introduce in-display fingerprint scanning technology in its next Galaxy Note smartphone due to launch in the second half of 2018).
So, if the industry shifts away from fingerprint authentication altogether -- at least for the types of higher-end devices that Synaptics seems to be targeting with its in-display fingerprint recognition solution -- then that could mean low demand for such solutions over the long term.
Considering that fingerprint scanning technology has been a source of robust growth for the company, a shift toward facial recognition could ultimately prove risky to Synaptics' growth rate.
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Ashraf Eassa owns shares of Qualcomm. The Motley Fool owns shares of and recommends Apple. The Motley Fool owns shares of Qualcomm and has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.