Focus on strategy execution
In 2019, Fingerprints made considerable progress against our strategic priorities: building on our strong position in the mobile industry while broadening our business.
Highlights of the year: focused execution of the strategy
We did not achieve all of the targets we had set for 2019 but, when I look back on the past year, it is clear that we made considerable progress against our strategic priorities, which I described in last year’s Annual Report: to defend and build on our strong position in the smartphone segment, while broadening our business into new areas. During the year, we strengthened our position as the leading supplier of capacitive fingerprint sensors for smartphones. In parallel, we positioned ourselves for future growth by launching new products and solutions, securing new customers and establishing important strategic partnerships.
In Mobile, the FPC1511, the fourth generation of capacitive sensors, has been a key feature of our successes. This sensor accounted for a considerable part of sales in 2019, and was one of the factors that enabled us to increase our share of the market for capacitive sensors for mobile phones. Fingerprints’ share of the market amounted to just over one-third of the almost 700 million devices delivered with capacitive sensors in 2019. We could announce during the year that the FPC1511 sensor was being used in two smartphone models from Samsung. This means that Fingerprints’ technology is now being used in products from eight of the world’s ten largest smartphone manufacturers.
We continued to consolidate our position as the leader in capacitive sensors for smartphones by launching new products, such as the FPC1520, a new sensor generation that builds further on our already successful product, the FPC1511. And at the end of the year, we presented the FPC1540, a thin sensor designed for side mounting. This product can be integrated into, for example, the volume controls of a device, or in the power button, such as in the models Redmi K30 and K30 5G from Xiaomi.
An important objective for Fingerprints is to capture a significant share of the market for under-display sensors for smartphones. We did not meet this goal in 2019. However, the goal stands firm and we are working hard to secure design wins in 2020.
We continued to strengthen our leading position in biometric smartcards in 2019, in part through the launch of the FPC-BEP,
Fingerprints’ biometric software platform for payments. Fingerprints can now offer a complete hard- and software solution for secure and user-friendly biometric authentication in the payments area. Already early in the year, Fingerprints secured the world’s first volume order of fingerprint sensors for dual interface biometric payment cards from Gemalto (now Thales). Since then, a number of new market trials have been started in various locations around the world to test and fine tune various aspects of the system ahead of forthcoming commercial rollouts. Fingerprints’ technology is being used in all of the market trials announced to date of dual interface biometric payment cards throughout the world. Our T-Shape sensor and software platform are also being used in the first commercial launch of biometric credit cards, which was conducted by Cornèrcard in Switzerland in November 2019, with our partner Thales as the supplier of the card.
Stable sales trend and solid financial position
The average selling price (ASP) for capacitive sensors continued to decline in 2019, although at a lower rate than in the preceding year. Revenues decreased five percent, reflecting a more stable situation following a couple of years of revenue declines of around 50 percent. Our goal is naturally to again show growth, both by expanding the product portfolio and broadening the operations into new application areas. The gross margin was 23 percent, which is not satisfactory.
Our efforts to strengthen profitability continue, both through new innovation and a strong cost focus. Financial strength is a prerequisite for being able to continue to invest in development initiatives. Cash flow from operating activities in 2019 amounted to SEK 160 M, and cash assets at the end of 2019 increased to SEK 564 M from SEK 540 M a year earlier.
STRONG STARTING in an expanding global industry
The advantages of more secure and more user-friendly authentication through biometrics have been demonstrated in mobile telephony, where Fingerprints’ growth opportunities are favorable. The value of the market for smartphone biometrics is expected to increase steadily year to year, and fingerprints will continue to be the most prevalent biometric modality.
We will continue to consolidate our leading position in capacitive sensors by ensuring that we have a comprehensive, competitive product portfolio for all segments. At the same time, we aim to establish a position in the growing market for under-display sensors. It is also important for us to be able to offer a competitive alternative in touchless, which is why we launched our Touchless 2.0 platform in October 2019, based on a combination of face and iris recognition.
Biometrics is now genuinely on the way to penetrating another global mass market: card payments. The market potential is
considerable. About four billion smart payment cards are already produced per year and this number could increase to as many as six to eight billion in a few years. Fingerprints has a fantastic starting point in this market, with well-established cooperation with the leading players along the value chain for biometric smartcards: card manufacturers and their subcontractors, manufacturers of secure elements, payment systems and card issuers. In early 2020, Thales announced that the company’s card, in which Fingerprints’ technology is integrated, has been certified by Mastercard. This is a significant step that enables card issuers throughout the world to offer their customers biometric payment cards.
The coronavirus outbreak in early 2020 has had profound consequences, not least for all those affected by the disease. Protecting the health and well-being of our employees, customers and partners, and thus also contributing to decreasing the spread of the virus in the surrounding community, is of paramount importance for Fingerprints. We have, like most other companies, adapted our work routines and business operations have continued in a good way. At the same time, it is clear that the world is undergoing enormous social, economic and political tensions. Of course, we are also affected. As I have said before, we expect a dampening effect on the company’s operations, although we are working hard to mitigate the effects as far as possible. We will come back with more information in our financial reports.
Let me finish by thanking all of the employees for your hard work and dedication during the year.
President & CEO