There is lots of hype around the recent iPhone 5S release because of its inclusion of a fingerprint sensor developed by Authentec – acquired by Apple last year – for increased device security and mobile payment functionality. Couple of observations.

First Authentec was acquired for $350 Million as much for its intellectual property – which strengthens Apple’s position against Samsung and Google/Motorola in Billion Dollar patent disputes – as its fingerprint expertise. Authentec’s annual revenue was $80 million but they lost money on every single fingerprint sensor they sold/made. Authentec’s management team did a great job in securing patents, but could not create a profitable biometrics business. Apple could have simply purchased product and/or licensed the Authentec fingerprint technology but decided (in my opinion) to buy the whole company for its IP portfolio.

Second there is growing pressure on every phone manufacturer to maintain/boost its margins. A silicon-based biometric chip does increase the manufacturing/material cost of an iphone, plus require additional overhead and customer support expenses.

Apple competitor’s, who already build phones with a camera and microphone, can also provide biometric-based device security but use readily established voice and facial recognition software, without any incremental hardware costs. So instead of swapping your finger (which is difficult if your finger is cut or if weather is cold), you simply tell “Google Voice” a predefined word, then point the camera at your face to unlock the phone. This approach provides three-factor biometric authentication – you must know the correct word, spoken with the correct voice, coming from the correct mouth/face – and greatly enhanced security, with virtually no impact on the user. And there is the obvious concern about fingerprint data and privacy concerns in light of NSA/Snowden controversies.