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Why Apple Is Chipping In on Finisar

Apple reportedly plans to incorporate its FaceID technology into more iPhone models in the near future.

Apple Inc. spends billions of dollars per year to help its manufacturing partners. Still, $390 million may go further than many think.

That is how much the world’s most valuable company awarded Finisar Wednesday out of its “advanced manufacturing fund.” Apple created the $1 billion fund earlier this year to support U.S.-based manufacturing operations, not coincidentally after President Donald Trump spent his campaign lambasting the company for not building more of its products domestically.

In this case, it helps when politics combine with the law of supply and demand. Silicon Valley-based Finisar makes vertical-cavity surface-emitting lasers, or VCSELs. These are key components in the types of 3-D sensing arrays that Apple uses in its iPhone X to scan the user’s face. Shortages of that component led Apple to delay the release of the iPhone X to early November—about six weeks later than its normal iPhone launch window.

Apple reportedly plans to incorporate its FaceID technology into more iPhone models in the near future, which means it needs to boost supply of VCSELs well beyond current capacity. Supporting the Finisar plant located in Sherman, Texas, should help accomplish this aim and score the company some political points in the process. But it should be noted that Finisar—which saw its stock price soar 25% on the news Wednesday—clarified in a filing later in the day that the award wasn’t an investment, but rather “anticipated future business” between the two companies.

That means Finisar is still on the hook to scale up the facility by the middle of next year. Still, the announcement represented a rare public nod of approval from Apple, which is typically loath to discuss its relationships and usually forbids its suppliers from even mentioning its name in public. Sometimes, it helps more to be seen.

Write to Dan Gallagher at dan.gallagher@wsj.com

Appeared in the December 14, 2017, print edition as 'Why Apple Chipped In On Finisar.'


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