Shenzhen Goodix Technology Co., Ltd. (SH: 603160), which mainly manufactures fingerprint identification chips and capacitive touch controller chips, has become one of the best investments in the semiconductor sector of the year in China. The Company was founded in 2002 in Shenzhen and was listed in 2006. The company saw its share price jumped 160% this year and its market cap has hit more than RMB 100bn (roughly USD 14bn) at its peak. (78.2 at the end of Dec)
Chinese companies have mainly been followers in the semiconductor industry while Goodix with its strong R&D capabilities has become Android’s No.1 fingerprint solution provider. In fact, Goodix’s path to become one of the leading semiconductor companies in China has not all been smooth sailing. Goodix’s earnings saw a big drop in 2018 when Apple decided to switch to facial recognition for its iPhone X. However, the wide adoption of Goodix’s under-display fingerprint sensor (UD FPS) across all major OEMs in China since the second half of 2018 led to a strong rebound for Goodix. The company’s revenue for the first three quarters of 2019 reached RMB 4.68 bn (roughly USD 0.67bn), increasing 97.8% YoY. Its net profit for the three quarters combined also reached RMB 1.71bn (roughly USD 0.24bn), increasing 437.2% YoY. More than 98 smartphone models have adopted Goodix’s UD FPS solution.
There are a few reasons behind Goodix’s success. First of all, the trend to increase display size and make the bezels as small as possible for smartphones calls on new solutions for biometric recognition that do not take up space in the bezels. The traditional capacitive FPS can no longer be used under the display due to poor depth sensing. Among a limited number of solutions, Goodix’s optical UD FPS solution best meets these criteria.
Secondly, optical UD FPS technology relies on capturing on optical image of the fingerprint which requires OLED as the light source. Based on Counterpoint’s data, the use of OLED has been steadily increasing in mid-to-high end smartphones, and OLED penetration is expected to surpass 40% in 2020. The increased penetration of OLED screens further helped to drive the adoption of optical UD FPS.
We continue to hold a positive outlook for Goodix in 2020 given Goodix’s strong R&D capabilities and new product pipeline. In December 2019, Goodix kicked-off the commercialization of the ultra-thin optical UD FPS in the OnePlus 7T Pro 5G McLaren, released in the US. The upgraded ultra-thin FPS is especially useful for 5G smartphones where the FPS module size needs to be as small as possible to fit in more complex deigns and antennas. In addition, Goodix is actively exploring UD FPS in LCD screens and its commercialization will further drive volume growth.
