* FPC scraps 2017 forecasts, dividend
* Sees even lower Q1 revenue, weakness in Q2
* Shares down as much as 42 pct (Updates share price in final paragraph)
By Helena Soderpalm and Olof Swahnberg
STOCKHOLM, March 21 (Reuters) - Shares in Fingerprint Cards (FPC) plunged as much as 42 percent on Tuesday after the former stock market star scrapped plans to pay a dividend and said it could not forecast likely earnings for 2017.
The Swedish company, which as its name suggests provides fingerprint sensors for technology products, blamed weaker demand from smartphone makers and inventory build-up for the warning.
It has been losing its dominant market position as more companies switch to using two or three suppliers rather than relying solely on its products.
FPC has 20-30 competitors globally and its main rivals include China's Goodix, Silicon Valley-based Synaptics and Taiwan's Egis Technology.
Carnegie analyst Havard Nilsson warned that FPC's revenue might decline this year after growth of around 130 percent in 2016 and over 1,100 percent in 2015.
"It seems unlikely the weakness is explained only by high inventory as competition is increasing from Goodix, Silead, Elan and Idex," said Nilsson, who has a "Sell" recommendation on the stock.
FPC revenues could fall to between 4 billion and 6 billion Swedish crowns ($455-683 million) this year versus 6.6 billion in 2016, he added.
FPC itself said it expected revenues to decline by more than 50 percent year-on-year in the current quarter, and its challenges to extend into the second quarter.
Its previous guidance was for first-quarter revenue to be "materially weaker" than a year ago, when the figure was around 1.5 billion Swedish crowns.
It also scrapped a dividend payment of 2 crowns per share for 2016 which it proposed at the start of February.
"As a consequence of the current short term uncertainty, the company has decided to refrain from further guidance for 2017 and the board of Fingerprint Cards has decided to withdraw its proposal of dividend for 2016," the company said in a statement.
FPC had previously forecast revenues of 7.5 to 9.5 billion Swedish crowns in 2017 with an operating margin to exceed 35 percent.
Chief Executive Christian Fredrikson, who took charge last August, acknowledged tougher competition but sought to reassure investors.
"That's the name of the game - I think that will continue and there's nothing else to do about it. But we feel we are in a strong position to defend our market leadership," he told a telephone conference.
The company also lowered its forecast on market share for 2017 to around 50 percent from a previous estimate of above 50 percent. That compares with between 55 and 60 percent in 2016.
The 20-year-old firm had its big breakthrough in 2015 when demand for fingerprint sensors in smartphones and tablets soared after other manufacturers followed the lead of Apple, which bought its own sensor maker, AuthenTec, in 2012.
FPC's share price surged around 1,600 percent in 2015 but lost almost half their value last year.
Shares were down 27.6 percent at 36.50 crowns at 1140 GMT, after falling 20 percent so far this year until Monday's close. ($1 = 8.7853 Swedish crowns) (Reporting by Olof Swahnberg and Helena Soderpalm; Editing by Keith Weir)