In view of the lockdowns in China, we are taking a number of measures to adapt our costs. Regrettably, this will entail staff reductions in certain areas. We are reducing the workforce globally by about 10 percent, at the same time as we are deferring some projects and cutting back on our other costs. However, all of our growth-oriented projects are proceeding according to plan. Combined, these actions will reduce our annual operating expense run rate by approximately SEK 80 M, corresponding to approximately 20 percent of our cost base, with full effect from the fourth quarter of 2022. These cost adjustments are necessary to meet the slump in the Chinese mobile market.

Meanwhile, Fingerprints’ long-term goals are unchanged and we remain focused on implementing our strategy. During the year, we have increased our market share in capacitive fingerprint sensors for mobile phones, while we are now also establishing a position in the market for optical under-display sensors. On June 30, we announced that we had secured a design win for the FPC 1632, our optical under-display solution, from a major Asian smartphone OEM. We expect to commence shipments relating to this project in the fourth quarter of this year. This marks our entry into an entirely new market segment, thereby opening attractive growth opportunities. If we consider the market for fingerprint sensors in mobile phones, capacitive sensors account for approximately two-thirds of the volume while under-display sensors account for about one-third. The average selling price (ASP) for under-display is higher, so in terms of value these two markets are more comparable in size. Our entry into the under-display segment thus entails a significant expansion of our addressable market. Fingerprints’ goal is to capture a significant share of the under-display market, and we expect the FPC 1632 to make a considerable contribution to our revenues next year. In parallel, we shall continue to be a world leader in capacitive sensors.

We are thus strengthening our position in Mobile at the same time as we are now also broadening our revenue base to encompass areas outside the mobile industry at an increasingly rapid pace. Our revenue in application areas outside mobile telephony has been about 10 percent for the past two years. During the first half of this year, however, we noted a substantial increase and we expect this share to continue to increase during this and next year. This will fuel growth while reducing our risk level as we expand into new areas. Our operations in Payments are making a positive contribution, but the Access and PC segments account for the vast majority of the anticipated growth outside the mobile industry next year. Four of the world’s six largest PC manufacturers already use our biometric technology in their products, and the proportion of computers equipped with fingerprint sensors is now increasing steadily. During the quarter, a further two laptop models integrating Fingerprints’ technology were launched by a Taiwan-based PC manufacturer. We will also shortly be able to announce the first computer to feature Fingerprints’ biometric Match-on-Chip solution, which was added to Microsoft’s approved vendor list (AVL) for Windows Hello Enhanced Sign-in Security earlier this year. This approval means that we can now efficiently address the entire PC market: both enterprise computers and PCs for private use. Match-on-Chip solutions for business computers have a higher ASP and currently account for about half of our addressable market in the PC segment.

We maintained a high level of activity in Payments during the quarter. There is substantial potential in this area, although biometric payment cards still account for a modest proportion of our sales. During the period, we announced that our technology is being used in two commercial launches of biometric payment cards in Morocco. This means that Fingerprints’ T-Shape sensor module for payments is now being used in eight commercial launches of biometric payment cards in different parts of the world. We are continuing to drive the development in collaboration with several of the world’s leading payment card players. As previously announced, the world’s three largest suppliers of secure elements for payment cards – Infineon, NXP and STMicroelectronics – have all chosen Fingerprint Cards’ technology for their reference designs. During the quarter, we announced collaborations with several other players in the value chain – Feitian, BCC, MoriX Co., LTD, Transcorp and Mswipe – with the aim of developing advanced solutions for biometric payment cards. We are still only in the infancy of this development, and we will continue to strengthen our world-leading position in this emerging mass market for biometric solutions.

While the slowdown noted in the mobile market in China in the second quarter was severe and has negatively affected OEMs as well as their component suppliers, our assessment is that the effect is temporary and that the situation will gradually return to normal. Our strategy stands firm and we are focusing on strengthening our position, both in the mobile market and in the new rapidly growing segments that contributed to an improvement in our gross margin in the second quarter. Fingerprints’ revenue streams will continue to diversify at a rapid pace during the remainder of this year and in 2023.

Christian Fredrikson, President and CEO

Today at 09:00 CEST Fingerprints’ CEO Christian Fredrikson will present the report together with CFO Per Sundqvist in a combined webcast and telephone conference. The presentation will be held in English.

The report will be available at fingerprints.com

The presentation will be webcast, and participants can register via this link: https://edge.media-server.com/mmc/p/964ycad6

For media and analysts: Registration for the teleconference is carried out via this link: https://register.vevent.com/register/BI0460f85298c04bf384fa9580b2451218

Attachment

• Interim report Q2 2022