BARCELONA/TAIPEI -- For Shenzhen Huiding Technology, also known as Goodix, a leading provider of the chips that underpin fingerprint technology in smartphones, being a Chinese company is a blessing.
Goodix might not yet be a household name, but the up and coming company that is listed in Shanghai became China's No.1 chip design company by market capitalization less than a month after it went public last October. Its shares have advanced almost 250% in the last six months to close at 97.3 yuan ($14.1) on Friday.
"Being more close to Chinese smartphone makers is the key to the success of Goodix... We grow rapidly because our clients also become stronger and stronger and there are more China-based device makers than in any other place of the world," said Founding Chairman and Chief Executive David Chang in a recent interview with the Nikkei Asian Review.
Chang added that compared with its two top competitors -- Synaptics of the U.S. and Fingerprint Cards of Sweden -- Goodix has more advantages due to its ability to directly communicate with Chinese customers and expand its businesses in the world's largest consumer market.
The company's fingerprint solutions can be seen in smartphones by Huawei Technologies, Oppo, Vivo, Xiaomi, Lenovo Group, Meizu, Gionee, LG Electronics and other Chinese brands. U.S. tech group Apple uses an in-house solution for its popular iPhone.
Excluding the iPhone, in 2016 Goodix was the world's No.2 fingerprint sensor supplier after Fingerprint Cards, according to research company IHS. Just a year earlier, the Shenzhen-based tech company was relatively small with few big-name customers.
"Goodix has had tremendous growth including market share gains in the last two years. It won market share from competitors thanks to a combination of strong pricing and proven products," said Jamie Fox, an analyst at IHS. "Also, it has customers in China where the market grew even faster, having started from a very low position."
However, some analysts are concerned that the fingerprint chip market could see a price war in 2017, although they agree that the volume of the sensors will continue to grow.
"We believe there will be more phones embedded with fingerprint features but we are worried that Goodix could face fierce price competition in 2017 that could have an impact on its future earnings," said Mark Li, an analyst at Bernstein.
Li said he is also concerned about Goodix's overseas expansion as it might face patent issues in some markets.
However, Chang said he expects fingerprint applications to be adopted in more devices despite the fast maturing smartphone market and the fact that the 10th anniversary of the iPhone could squeeze the sales of most of Goodix's Chinese and Korean mobile clients.
"We do see uncertainties in the market for this year but people still need to work hard no matter if it is the 10th or whatever anniversary of the iPhone," said Chang.
He added that his company was now looking to expand into smart automobiles and various connected devices, where he sees great growth potential.
For full-year 2016, the company posted on April 8 that revenue grew 175% to nearly 3.079 billion yuan ($446 million) from a year ago, and net profit surged more than 126% year-on-year to 856 million yuan. Most of the sales still came from China, though it has already set up marketing offices in Taiwan, South Korea, Japan and the U.S. for its global expansion.
The rise of Goodix came as Beijing aggressively pushed to build a competitive chip sector and reduce reliance on foreign companies such as Qualcomm, Intel, Micron, Toshiba, Samsung Electronics and SK Hynix. Chips are considered crucial components in electronic devices and key to national security.
Chang said he is happy to see thriving and enthusiastic investment currently in the semiconductor sector.
"If China can continue the investment for years... As we have both a huge market and big customers, I am confident that we can also build a chip industry that is as competitive as or even stronger than the U.S.," Chang said.
Founded in 2002 by Chang, Goodix started out as a tiny supplier making chips for landline phones. After 2008, it began to provide touch panel controller chips to local device makers and grew to become China's largest homegrown supplier in the sector. By 2013, it expanded its business into fingerprint sensors and quickly grabbed share from overseas rivals.
Taiwan's MediaTek, the world's largest mobile chip provider to China, is one of the early investors in Goodix, controlling 21.34% of the Chinese company. Goodix's products are mainly produced by Taiwan Semiconductor Manufacturing Co., the world's top contract chipmaker.