What the Apple press missed in Monday’s Lumentum story

I missed it too. My readers did not.

Apple fell sharply Monday, taking with it the shares of a raft of tech companies—suppliers and competitors alike.

The trigger: One of its suppliers, Lumentum, had warned investors that a major client, quickly identified as Apple, had sharply cut orders for VCSELs, the vertical cavity surface emitting laser units that provide the 3D face recognition sensors in X-generation iPhones.

Apple fell on the assumption that bad news for Lumentum spelled bad news for iPhone unit sales.

The fact that Lumentum’s chief competitor, Finisar, was the happy beneficiary last year of a $390 million investment from Apple’s Advanced Manufacturing Fund was not mentioned in the Wells Fargo note I excerpted Monday morning. Nor was it mentioned in the accounts posted by Reuters, CNBC or any of the other stories Google turned up, including this morning’s Wall Street Journal ($).

It was one of my readers, not the Journal, CNBC or Reuters, who spotted a report of the ribbon cutting last summer for Finisar’s new VCSEL manufacturing facility in Sherman, Texas. (A factory soon to be owned by Pennsylvania-based II-VI—pronounced “two six”—another VCSEL supplier that scooped up Finisar only last Friday for $3.2 billion in cash and stock.)

As friend-of-the-blog Gregg Thurman wrote:

Apple helped finance this facility. Instead of beating down AAPL on Lumentum’s poor guidance, the market should be rewarding Apple/AAPL for securing VCSEL supply at (probably) industry best prices.

It’s quite possible Apple’s engineering team has VCSEL specs they want Finisar to manufacture to that others won’t have.

As Cook has said on several occasions, you can’t make Apple performance assumptions based on supply chain “intelligence”.

My take: What Gregg Thurman said.

7 Comments

  1. George Knott said:

    Buying more Aapl today….!!!

    2
    November 13, 2018
  2. Richard Weathered said:

    My dividends reinvest in 2 days.

    0
    November 13, 2018
    • Gregg Thurman said:

      Thanks Fred/PED, but I have share the attribution with T R. He (she?) reported on Apple’s finance support of Finisar’s Texas facility before I did.

      A last thought on Apple’s relationship with Finisar: in my view, Apple has big plans for VCSEL technology in the future that justifies a $390 Million investment. I think VCSEL will be an integral element of Apple quality/QUANTITY articial intelligence implementations, and as is typical of Apple it is securing supply (to the detriment of competitors) before its introduction.

      0
      November 13, 2018
  3. Gregg Thurman said:

    Well, maybe not a last thought. I think Apple is changing how it reports performance because Apple’s future is not the iPhone, it is something else entirely and revolves around AI.

    HOw about movies where the viewer can insert themselves in the action? Fanciful? Absolutely, but so were the graphical user interface and touch interface. EVERYBODY pooh pawed them, but today they are the standard.

    What new standard is Apple about to drop on us? I think it’s possible we’ll find out next September.

    0
    November 13, 2018

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