Apple’s latest investment is a sign of things to come…

Apple just made a big $410 million investment in optics and laser company II-VI (pronounced “two six”). This is a very telling move. We don’t often read about Apple investing directly in companies. But the tech giant does have a not so well known program for doing so. It is called Apple’s Advanced Manufacturing Fund.  Through this program, Apple invests in companies providing key components that go into its products. It’s a way for Apple to reduce risk and support strategic suppliers in its own supply chain. As for II-VI, it is a great company known for its vertical-cavity surface-emitting lasers (VCSELs) – pronounced “vixels.” Exponential Tech Investor subscribers know this technology well. We’re currently up 51% on II-VI in our model portfolio.  

VCSELs are a key component in iPhones, starting with the iPhone 10 model. They power 3D-sensing, depth perception, and other optics-related features such as the iPhone’s Face ID. That’s the optional security feature where iPhone users can unlock their phone just by scanning their face. No pin numbers required.  So Apple clearly sees II-VI’s VCSEL technology as critical to its own business. And II-VI has been aggressively developing this technology for years now.

Back in 2019, II-VI smartly acquired a company called Finisar. Finisar had recently received a major investment from Apple’s Advanced Manufacturing Fund for its own VCSEL technology. And earlier this year, II-VI won a bidding war for another laser company called Coherent. Bringing Coherent into the fold will strengthen II-VI’s technology offerings even more.  No doubt these aggressive moves are what spurred Apple to invest heavily in the company. And this is about more than just features like Face ID.  II-VI’s VCSELs and light detection and ranging (LIDAR) technology are also critical to augmented reality (AR) functions. Apple’s big investment here is a major sign that AR will be a fundamental feature in each and every iPhone going forward.  

And the timing isn’t a coincidence.I am on record predicting that Apple will release the developer’s version of its first AR device this year. That will most likely happen at Apple’s developer conference in the summer.  Of course, that device will be powered by VCSELs and LIDAR as well. And that’s why Apple is making such a big investment into II-VI. It is securing the supply chain to support not only future iPhones and iPads, but also its upcoming AR device. So this is a sign of things to come.

 Augmented reality will be the next mass-market consumer frenzy when the technology is available in a sleek form factor and attractive price point similar to the Apple Watch. Apple’s investment in II-VI tells us that day is getting closer.