Consumer electronics giant Apple ( AAPL ) on Wednesday announced a $390 million investment in Finisar ( FNSR ), the second company to receive funding from Apple's $1 billion Advanced Manufacturing Fund.
Apple said the deal with Finisar, a maker of optical communications components, is part of its commitment to support U.S. manufacturing jobs and innovation. In May, Apple awarded $200 million to Corning ( GLW ) to support that company's state-of-the-art glass processing and research and development.
Finisar makes vertical-cavity surface-emitting lasers (VCSELs), which are used in the iPhone X smartphone to power Apple's Face ID facial identity software and other apps with Apple's TrueDepth camera and in its AirPods wireless earbuds for proximity sensing.
The Apple funding will allow Finisar "to exponentially increase its R&D spending and high-volume production" of VCSELS, Apple said in a press release .
Because of Apple's funding, Finisar will transform a long-dormant, 700,000-square-foot manufacturing plant in Sherman, Texas, into a VCSEL factory. Apple's award will create more than 500 high-skill jobs at the facility.
Apple has rapidly adopted depth-sensing technology in recent years, leading to the development and production of advanced VCSELs. In the fourth quarter, Apple will purchase 10 times more VCSEL wafers than were previously manufactured worldwide over a similar time period, Apple said.
Finisar stock jumped on the news. Shares catapulted 22.8% to close at 23.71 on the stock market today . Apple was up 0.3% to close at 173.
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Among Finisar's peers, Lumentum ( LITE ) was down 2.9% to close at 50.28 and II-VI ( IIVI ) slid 3.2% to finish at 44.75.
Piper Jaffray analyst Troy Jensen raised his price target on Finisar to 28 from 22 and reiterated his overweight rating.
"The biggest take-away from this announcement is Finisar's share opportunity at Apple," Jensen said in a report. "Up until now, we had assumed Finisar only had 25% of the high-powered VCSEL for the iPhone X and Lumentum had 75% of the high-power and 100% of the low-power VCSEL. Given Lumentum's initial success, we assumed Lumentum would maintain its primary supplier status at Apple for several years to come, but given Apple's cash commitment to Finisar, we believe Finisar could capture significantly more share than previously expected."
In addition to gaining share in high-power VCSELs, Finisar could ramp production capacity for low-power VCSELs for Apple as well, he said.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
