Finisar gets $390 million from Apple to make more iPhone X chips

(Reuters) – Finisar Corp is getting a $390 million investment from Apple Inc to revive a plant in Texas, which will boost production of chips that power high-profile iPhone X features including Face ID and portrait mode photos.

FILE PHOTO: The Apple logo is pictured inside the newly opened Omotesando Apple store at a shopping district in Tokyo June 26, 2014. REUTERS/Yuya Shino/File Photo

Shares of Finisar, a Sunnyvale, California-based optical components maker, rose more than 30 percent to $25.41 on Wednesday morning.

Finisar will use the money to reopen a 700,000-square-foot plant in Sherman, Texas to ramp up production of laser chips called vertical-cavity surface-emitting lasers, or VCSELs.

The lasers will also be used for 3D sensors in AirPods, Apple’s wireless headphones.

Finisar is expected to ship products from the plant starting in the second half of 2018.

“Taking in this amount of money, obviously there’s a significant investment that’s going to be made not just for 2018 but beyond,” Needham & Co analyst Alex Henderson said.

Shares of Finisar rival Lumentum Holdings Inc fell 12 percent to $45.80, which Henderson said validates how important 3D sensing technology is to Apple and other vendors.

Lumentum is the top supplier of VCSELs and represents a “single source risk” for Apple, he added. “Apple is accelerating the investment at the second source supplier to diminish its risk.”

The investment is Apple’s second from its $1 billion advanced manufacturing fund that seeks to foster innovation and create jobs. The first investment was a $200 million infusion into Gorilla Glass maker Corning Inc in May.

In the fourth quarter of 2017, Apple will buy 10 times more VCSELs than were previously made worldwide over a similar time period, it said.

The investment will also create more than 500 high-skill jobs at Sherman.

Reporting by Aishwarya Venugopal in Bengaluru; Editing by Savio D’Souza and Sai Sachin Ravikumar