iPhone Sleuths Laser Focused on Parts Clues in Finisar Earnings

  • Comments on 3-D sensor demand may hint at iPhone production
  • Facial-recognition feature expected in new phone this month

Apple Set to Launch 3 New Versions of iPhone

Companies that make a laser at the heart of the biggest iPhone innovation in years are being scrutinized for hints about how many 3-D capable devices Apple Inc expects to sell.

Finisar Corp., which reports quarterly earnings Thursday, is one of a small group of optical parts makers that produce a so-called vertical-cavity surface-emitting laser that is essential to burgeoning augmented reality technologies in smartphones. Apple is employing such a laser in a new premium iPhone for features including 3-D facial recognition that will be unveiled on September 12, people familiar with the matter have said.

What Finisar says about demand for its laser product could hold clues to the number of 3-D capable phones being produced or whether Apple plans to deploy the lasers in models beyond the premium tier, according to Loup Ventures co-founder Gene Munster, who has covered Apple for more than a decade.

“If they say they have orders for over $100 million, that’s massive,” Austin Bohlig, an analyst who works for Munster at Loup, said in an interview. “That would make us think it’s going into other phones.”

Apple announced its new AR software at the company’s developer’s conference in June and plans to make it available later this year. 3-D sensors enable users to scan faces or objects and blend the physical and virtual worlds.

Lumentum Holdings Inc. is the current market leader in 3-D sensors and has said it expects to ship more than $200 million in orders this year, mostly to one unidentified customer. That customer is widely believed to be Apple, which bars suppliers from disclosing which components go into future devices.

Finisar probably has about 25 percent of Apple’s 3-D sensor orders and has said volume in future quarters could be in the tens of millions of dollars, according to Bohlig. If Finisar discloses bookings of $20 million to $50 million, that would probably mean the sensors will be limited to the premium iPhone, Bohlig said.

“I think Apple will order everything that exists,” Michael Genovese, an MKM Partners LLC analyst in Stamford, Connecticut, said in an interview. “Finisar is going to end up shipping everything they can make, but it will be smaller than Lumentum, because Finisar doesn’t have the capacity.”

Sunnyvale, California-based Finisar had revenue of $1.4 billion in the last fiscal year. 3-D sensor demand is the most important factor for the company’s stock, said Genovese, who cautions that capacity limitations could make it an unreliable indicator for the iPhone.

“If they are selling to Apple, the stock will go up regardless of the rest,” he said. “If not, the stock is going down.”

— With assistance by Alex Webb, and Mark Gurman

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