:format(webp)/cdn.vox-cdn.com/uploads/chorus_image/image/57968799/DSCF2933.0.jpg)
Apple said today that it would give $390 million to Finisar, one of its suppliers, to build a plant in Texas for a part called “vertical-cavity surface-emitting lasers,” or VCSELs.
Why?
Apple uses VCSELs in its new iPhone X to scan your face for its Face ID feature, “portrait mode” photos and Animoji, and in its AirPod earbuds to sense your ears.
Things like 3-D and depth-sensing should figure more prominently into Apple’s product line over the next couple of years — not only as it adds Face ID to more iOS devices beyond the iPhone X, but also for future products like the augmented reality glasses it’s reportedly working on.
So it needs more VCSELs. A lot more. Apple says that in the fourth quarter of 2017 it will purchase “10 times more VCSEL wafers than were previously manufactured worldwide over a similar time period.”
It’s not unusual for Apple to finance its suppliers. And let’s be clear: This deal is as much about helping Finisar create a plant to build more VCSELs as it is about making sure Apple can dominate that supply at a favorable price — good for Apple, bad for competitors. (Apple also buys VCSELs from a company called Lumentum, according to Loup Ventures’ Gene Munster.)
That’s a move straight out of Tim Cook’s playbook — see prior examples like cornering the market for flash memory, which helped the iPod and iPhone dominate over the past 15 years, and also helped Apple hit its crazy profit margins.
It’s worth noting that this is not an equity investment; Apple calls it an “award” in its press release. Still, Finisar stock is up 30 percent today, and this is a big deal for the company, which is almost 30 years old and survived the dot-com bubble and crash experience.
It’s also the latest from Apple’s $1 billion “Advanced Manufacturing Fund,” which, in addition to supporting American manufacturing jobs, also helps Apple rebuff criticism from Donald Trump types that it only makes things in China. (Apple PR also produced this “feature” report about how the partnership will be “transforming the future of this Texas town.”) Apple has also doled out $200 million from the fund to Corning, which supplies glass for iPhones.
This article originally appeared on Recode.net.
