▶ We expect fingerprint scanning in smartphones to expand gradually from 2H14, as: 1) SEC’s Galaxy S5 – slated for global release on April 11 – is equipped with fingerprint scanners following Apple’s adoption on the iPhone 5S, and 2) other Android
players have been pursuing fingerprint scanners for upcoming models.
▶ We believe fingerprint scanning will eventually settle as a standard option in smartphones driven by an expanding scope of adoption and increasing mobile payment security. Of note 1) scope of adoption refers to a wider range of equipping fingerprint
scanners regardless of shape, scanning angle and location. 2) Mobile payment security refers to a safe, instant mobile payment environment beyond the basic functions of unlocking devices, encrypting data and user verification via software.
▶ Fingerprint scanners are largely segregated into high-end and low-/mid-range products. Specifically: 1) area-type sensors – scanning done via a touch and hold method – and sapphire glass-covered scanners are deemed as high-end versions, while
2) swipe-type sensors – scanning done via a downward swipe movement – and non-sapphire glass-covered scanner are deemed as low-/mid-range versions.
▶ While SEC and Apple have different business models in manufacturing fingerprint scanners in-house, we believe domestic handset component players will benefit from other Android set-makers adopting fingerprint scanners. 1) While Apple sources
the sensor chips and algorithms from its subsidiary, AuthenTec (AUTH.US), we believe the module packaging is performed by XinTec (3374.TW) and ASE (2311.TW). 2) On the other hand, SEC sources sensor chips and algorithms from Synaptics
(SYNA.US), but we believe SEC packages the modules in-house. Other Android players intending to adopt fingerprint scanners will need to source sensor chips from suppliers, but we believe that these set-makers will also need to gradually increase their reliance on module packaging companies in Korea. As such, we believe CrucialTec (114120) and Partron (091700) will benefit from the expanding adoption of fingerprint scanners.*
Source: Korea Investment & Securities Co.