What's going on?
As part of a plan to invest one billion big ones in American manufacturing, Apple has sunk $390 million into Finisar, one of the key suppliers of the facial recognition technology used in the new iPhone X.
What does this mean?
Finisar makes laser technology with 3D sensing capabilities for things like detecting a face. At the moment that means a novel way to unlock your phone, or a particularly expressive cartoon pig Animoji. But such functionality is in fact key to Apple’s increasing focus on augmented reality.
The “investment” appears to be structured, essentially, as a grant, although the exact conditions were not released. But Apple’s motives aren’t entirely altruistic: its money will help Finisar scale up quickly and provide Apple with the huge number of components it needs for its products.
Why should I care?
The bigger picture: This is exactly the type of “investment” that’s needed if the economy is to pick up steam.
Finisar is now set to reopen a mothballed plant in Texas and create more than 500 high-skilled (read: high-paying) jobs. Companies, including Apple, have been criticized in recent years for sitting on piles of cash rather than investing it productively – but the tide may now be turning as investment by businesses has picked up (particularly in the US). This is good news for the economy.
For markets: Apple is at risk of falling behind the likes of Google and Amazon.
Separately, a report out on Wednesday highlighted how Apple could severely lag Google and Amazon in a post-smartphone world (e.g. as we move to voice-activated devices powered by smart assistants). This criticism echoes a fear among some investors that Apple is over-reliant on hardware – especially the iPhone – and is behind in the development of software, like AI, that will help it compete in the next generation of consumer tech. By investing more in its augmented reality capabilities, Apple is looking to head off that threat.