Synaptics (NASDAQ: SYNA) had a forgettable 2017 despite a promising start to the year. There were rumors that the specialist in human interface solutions would land a spot in Apple's (NASDAQ: AAPL) new iPhones, allowing Cupertino to make devices with edge-to-edge screens thanks to its in-display fingerprint sensing technology.
Then, there were reports that Synaptics was collaborating with Samsung to build a fingerprint scanner directly into the screen of the Galaxy S8. Not surprisingly, investors got excited, and Synaptics stock soared in the first half of 2017.
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But Synaptics' development reportedly fell behind schedule, and it was branded as the culprit behind Samsung's failure to offer in-display fingerprint sensing. On the other hand, Apple went its own way and decided to reinvent the wheel with the Face ID in the iPhone X, while the iPhone 8 came with the traditional Touch ID. Synaptics stock dropped 25% in 2017.
However, Synaptics looks set to overcome last year's disappointments with its latest chip.
Synaptics' in-display fingerprint technology makes its debut
Last month, Synaptics revealed that it has begun mass production of its new FS9500 family of optical in-display fingerprint sensors, with one of the top five smartphone original equipment manufacturers signing up to use this technology in its devices. That vendor, the fast-growing Chinese brand Vivo, became the first smartphone company in the world to showcase a device with an integrated fingerprint sensor.
Though Vivo didn't give away details such as the specs or the name of the new device, it did say that the phone will soon go into mass production for an early 2018 release. So, it is likely that Synaptics' technology will hit the market in the next quarter or so, and it could potentially turn the company's fortunes on their head.
Vivo could unlock smartphone riches for Synaptics
Synaptics' design win at Vivo for its in-display fingerprint technology is a big deal. The Chinese company's smartphone shipments increased 19.5% in 2017, outpacing the overall market's 6.5% growth, as per TrendForce's data. The firm forecasts that smartphone sales will rise 5% this year, and Vivo could once again increase its sales substantially.
The bigger picture, however, looks even rosier for Synaptics. Vivo is a part of BBK Electronics, which also owns the OPPO and OnePlus smartphone brands. BBK's control over these three brands makes it the third-largest smartphone manufacturer globally. So, Synaptics' sales could boom this year as its fingerprint technology flows into other brands under the BBK umbrella, and it wouldn't be surprising if premium smartphone makers such as Apple and Samsung also choose Synaptics' solution.
Synaptics claims that its in-display fingerprint scanning solution is two times faster than 3D facial recognition, and is capable of reading fingerprints even if the user's fingers are wet, dry, or cold. This could encourage Apple to include Synaptics' solution in its next set of iPhones, given the problems it has run into with Face ID.
First, Apple reportedly had trouble sourcing components required to enable Face ID on the iPhone X, so it had to advance a huge amount to a component supplier. Then, there have been reports about the reliability of the facial authentication system as hackers have claimed that they can crack Face ID using a 3D-printed mask.
So, it won't be surprising if Apple decides to include an alternative biometrics system in the next edition of its iPhone. In fact, Apple could claim to make its iPhone more secure by using two-factor authentication that could be enabled by a combination of Face ID and a fingerprint sensor.
Moreover, Samsung could finally be able to put a fingerprint sensor on the screen of its flagship Galaxy device after it was forced to relocate it next to the rear camera the last time. Synaptics' new chip could finally help it unlock smartphone riches after last year's disappointment, helping the company tap into the growing trend of end-to-end smartphone displays.
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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple. The Motley Fool 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.
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