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Why Qualcomm's Galaxy S10 Ultrasonic Fingerprint Sensor Win Matters

A Qualcomm Snapdragon chip next to some purple flowers.

If you followed the news out of Mobile World Congress, you probably know that wireless-chip giant Qualcomm (NASDAQ: QCOM) had a massive presence there. The company talked up its success with its current crop of 5G wireless chips and made some substantial announcements about upcoming products, including a next-generation standalone 5G modem and an upcoming premium applications processor that integrates 5G technology .

On top of that, many smartphone vendors announced devices incorporating Qualcomm's 5G technology, signaling to consumers and the capital markets that Qualcomm has the pole position in this industrywide transition to the next-generation wireless standard.

A Qualcomm Snapdragon chip next to some purple flowers.

Image source: Qualcomm.

Seemingly lost in the excitement, however, was the announcement that Samsung (NASDAQOTH: SSNLF) is using Qualcomm's ultrasonic in-display fingerprint sensor. Here's why this is a big deal.

Qualcomm's overall strategy

Qualcomm has made it clear that it wants to be considered not just a component vendor but a complete platform vendor. That means that in addition to recognizing that it supplies mobile applications processors, Qualcomm wants the world to know that it also sells other smartphone-related chips, such as power management chips, audio codecs, radio frequency chips, and, of course, fingerprint sensors.

A platform approach helps Qualcomm in two ways. First, selling customers more products means more revenue and gross profit. Not only is more dollar content per smartphone a good thing in general, but it's particularly helpful as the smartphone market has been facing declines. It's a plus for Qualcomm if its business can grow in the face of a stagnant or declining smartphone market.

A second, more strategic objective is to make its offerings even stickier than they are now. Qualcomm is the market leader in mobile applications processors, but as always, it faces fierce competition from other merchant chip vendors and vertically integrated customers alike. By offering more complete platforms, Qualcomm can make life easier for prospective customers, as those customers now have fewer suppliers to deal with.

Put simply, Qualcomm wants to become a one-stop shop for smartphone makers. And now that the company's fingerprint sensors seem to be gaining traction at the big smartphone makers, its efforts in that area should now command a lot more credibility.

What's next?

In the short term, Qualcomm should enjoy a modest financial benefit from selling ultrasonic fingerprint scanners to Samsung, which sells tens of millions of its flagship Galaxy S-series smartphones each year.

Over the longer term, though, I expect more smartphone makers to adopt Qualcomm's fingerprint scanning technology. It's worth noting that Qualcomm has a broad portfolio of fingerprint scanners, from the very high-end ultrasonic parts that can scan through glass to less sexy scanners that can scan through metal for lower-end devices. So Qualcomm isn't simply dependent on winning spots in flagship devices -- it can leverage its platform approach to gain fingerprint scanner share in higher-volume, lower-end devices, too, further boosting its revenue and gross profit.

There have also been significant industrywide efforts to replicate the Face ID 3D sensing technology on the latest iPhones. Qualcomm has its own efforts in motion there, although it's not clear whether 3D sensing will take off in premium Android devices when in-display fingerprint scanning seems to be a viable option. But many Android vendors seem obsessed with maximizing their devices' screen-to-body ratios, and an ultrasonic fingerprint scanner makes that easier.

The point is that Qualcomm is well positioned in the world of smartphone biometrics, and that's something investors should cheer.

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Ashraf Eassa owns shares of Qualcomm. The Motley Fool owns shares of Qualcomm. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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