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(Image courtesy of Apple).

Apple Grants $390 Million to Finisar, Which Makes Infrared Laser Chips

Inside Apple’s iPhone X is an infrared camera system, which can scan the contours and shape of a person’s head to unlock the phone and authorize mobile payments. Now Apple is trying to boost production of a critical component that can project infrared dots to deduce the minute details of a person’s face.

The company said on Wednesday that it had awarded $390 million to Finisar to build a new factory for these vertical cavity surface emitting lasers, or VCSELs. The parts are used in the front-facing camera, called TrueDepth, to enable functions like FaceID, which makes sense of the infrared dot pattern to determine if you own the smartphone before unlocking it.

TrueDepth is also behind augmented reality functions like Animoji, which can record a person’s facial expressions that can then be replayed in an emoji. Apple is trying to turn the camera into the centerpiece of its smartphones and tablets, as it recently released an augmented reality software development kit called ARKit.

Apple seems to suggest that its future gadgets will carry the same capabilities, and so it will need a constant supply of infrared parts. Finisar said that it would use the grant to reboot a 700,000 square foot plant in Sherman, Texas, to increase production of VCSELs, which are also used as proximity sensors in Apple’s AirPods headphones and as laser printer parts.

Finisar is expected to ship the first products from the plant in the second half of next year, reinforcing the output from its nearby plant in Allen, Texas. Apple is also said to buy VCSELs from Milpitas, California-based chip maker Lumentum, which disclosed in August that it had received $200 million in orders from a customer thought to be Apple.

The grant to Finisar is Apple’s latest investment from its $1 billion Advanced Manufacturing Fund, which Apple formed to highlight how it contributes to job creation in the U.S. It also awarded $200 million to Corning, which supplies the glass for Apple’s iPhones. The grant is expected to support Corning’s research and development and equipment expenses.

The strings attached to Apple’s investments are not crystal clear. Finisar claimed that Apple’s funding was not a debt or equity investment. “The amount referred to by Apple represents anticipated future business between the companies over a period of time,” the company said in a regulatory filing, implying that Apple is paying upfront for a constant supply of chips.

This is not an unusual tactic for Apple, which has reportedly grappled with supply issues for the iPhone 8. In September, Apple joined a clique of American investors that spent $3.7 billion to help private equity firm Bain Capital buy Toshiba’s microchip unit, which sells flash memory. This is Apple’s way of cutting the distance between its suppliers and products.

Now it is tightening ties with the Sunnyvale, California-based Finisar, which earned revenues of around $1.4 billion in 2017, up almost 15 percent from last year. “VCSELs power some of the most sophisticated technology we’ve ever developed,” said Jeff Williams, Apple’s chief operating officer, in a statement.

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