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On mine, it seems to be related to maybe grounding. I only have this issue if I use TouchID by floating my hand above the keyboard. If I rest my hand on the metal case next to the trackpad and use TouchID simultaneously, it works fine.
 
On mine, it seems to be related to maybe grounding. I only have this issue if I use TouchID by floating my hand above the keyboard. If I rest my hand on the metal case next to the trackpad and use TouchID simultaneously, it works fine.
The screen flashing issue still occurs even with hand on palm rest next to touchpad after DEEP SLEEP is activated (when air display is off after ~15mins or more). You should try again after DEEP SLEEP (not immediately after screen is off OR right after you click "sleep"). Wait longer then try again.

Note: it was unplugged if that makes any difference. MacOS Monterey 12.1
 
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The screen flashing issue still occurs even with hand on palm rest next to touchpad after DEEP SLEEP is activated (when air display is off after ~15mins or more). You should try again after DEEP SLEEP (not immediately after screen is off OR right after you click "sleep"). Wait longer then try again.

Note: it was unplugged if that makes any difference. MacOS Monterey 12.1
Did you restore any older mac time machine backup when you setup your Macbook the very first time?

I kind of have feeling that it could be a cause, because I did that and that’s what Apple suspects could be the reason.
 
Did you restore any older mac time machine backup when you setup your Macbook the very first time?

I kind of have feeling that it could be a cause, because I did that and that’s what Apple suspects could be the reason.
Set up as new Macbook air m1. It seems after “Deep Sleep” you need to first wake it up then use touch id.

Why Apple??????!!!!!!
 
Set up as new Macbook air m1. It seems after “Deep Sleep” you need to first wake it up then use touch id.

Why Apple??????!!!!!!
Thanks for confirming.

I wish there was a way to confirm if it is a software glitch or hardware.
I am thinking of returning it if it is a hardware issue. However, I ran hardware test and the result code was ADP000 which means no issues were found so I am baffled.
 
I was facing same issue on my new Macbook Pro 2021 (14inch M1 Pro) with Monterey 12.1 which came pre-installed.
After downgrading to 12.0.1 yesterday, this issue doesn't happen anymore. Definitely a software bug in 12.1 Monterey.
 
Update: I'm still having this issue. And I bought another M1 MacBook Air for my wife and hers has the same issue.
 
This was bugging me as well. (MacBook Air M1) If you press once and release and just leave your finger on the sensor for a second, all is well!
 
My brand-new M1 Air on 12.2 (will update shortly) is also doing this. Glad to see it's not just me.

My 2020 i5 Air at work does not do this.
 
I am experiencing the same on a Macbook Air M1. macOS Monterey 12.4.

When the macbook is sleeping for more than a few minutes, resting my finger on the touch ID key does not wake. So I thought I could press the touch ID button to wake it and keep my finger resting on the button so it would also unlock. Unfortunately doing this replicates the OP's video.

Instead, I have to press another key (e.g. delete key) to first wake the screen, then rest my finger on the touch ID.

I wish I could do it the way I described in my second paragraph because it is a more seamless action. Nonetheless, waking by first pressing another key is not a big nuisance.
 
I am experiencing the same on a Macbook Air M1. macOS Monterey 12.4.

When the macbook is sleeping for more than a few minutes, resting my finger on the touch ID key does not wake. So I thought I could press the touch ID button to wake it and keep my finger resting on the button so it would also unlock. Unfortunately doing this replicates the OP's video.

Instead, I have to press another key (e.g. delete key) to first wake the screen, then rest my finger on the touch ID.

I wish I could do it the way I described in my second paragraph because it is a more seamless action. Nonetheless, waking by first pressing another key is not a big nuisance.
Yes, I'm seeing the same problem consistently now. For many months I used my M1 MacBook Air in clamshell mode plugged in and used a touchID Apple Magic Keyboard so I don't know when the problem returned. Previously, on Big Sur I only saw it happen a few times. Every time the computer goes to sleep now (after a few minute wait.)
 
Interestingly, I ran the following terminal commands to try and resolve the overnight battery drain issue I was seeing due to repeatedly waking from sleep:

Code:
sudo pmset -a tcpkeepalive 0
sudo pmset -a powernap 0

After running those commands I haven't seen the TouchID wake up issue since. Also seems to have resolved my sleep drain. Two-for-one deal.
 
Interestingly, I ran the following terminal commands to try and resolve the overnight battery drain issue I was seeing due to repeatedly waking from sleep:

Code:
sudo pmset -a tcpkeepalive 0
sudo pmset -a powernap 0

After running those commands I haven't seen the TouchID wake up issue since. Also seems to have resolved my sleep drain. Two-for-one deal.
Will this work with -b instead? I don't mind powernap when AC charger is connected.

EDIT: Just tried it, along with other options and the same commands in this link: https://discussions.apple.com/thread/252061187?answerId=254447737022#254447737022

The touch ID wake up issue is still there. When I test, I sleep the macbook M1, then wait at least 5 min before trying touch ID to wake.
 
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Will this work with -b instead? I don't mind powernap when AC charger is connected.

EDIT: Just tried it, along with other options and the same commands in this link: https://discussions.apple.com/thread/252061187?answerId=254447737022#254447737022

The touch ID wake up issue is still there. When I test, I sleep the macbook M1, then wait at least 5 min before trying touch ID to wake.

Yup turns out it's still there on mine. I guess it's just waiting longer to put itself to sleep if the lid is still open after running those commands.
 
Its a software issue. Do not let Apple fix your Mac as it doesn't need it. We need to keep reporting this bug. Did anyone test this on the new macOS Ventura?
 
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I wonder that this bug still remains. I google it after a year a found this active thread.
Macbook Air M1 16/512, Macos 12.5.
 
I started noticing the same issue in the last 4 days on my MB Air M1 16/256. I have updated to macOS 12.5 8 days ago, so I don't rule it out as a possible cause, since I haven't changed settings nor installed software after the update. I guess I'm going to report it to Apple.
 
Having the same issue on a M2 Air running 12.5 since day 1.
Lol. Just basic funcionality. Click on touchID button and login to system. You have to use two clicks, or wakeup with trackpad or key and then login...
 
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