Editor's note: This article has been updated with additional information from Finisar's financial earnings call for the final quarter of the 2017-2018 fiscal year.
Finisar Corp. announced Monday that its Sherman facility is expected to begin production on vertical-cavity surface-emitting lasers for Apple’s iPhone line of products by the end of the year.
In a press release issued Monday, Finisar officials said the Sherman facility, which is in the former MEMC building on the city’s south side, has been certified as “clean room operational and the first production tooling has been installed and qualified.” The company will hold a ribbon-cutting event July 9 with speakers from its executive management team, including Chief Executive Officer Michael Hurlston, and community leaders.
“Finisar is excited to unveil this new state-of-the-art facility which will expand critical production capacity of our VCSEL products needed to support customer requirements,” Hurlston said in the press release. “We are also pleased to create hundreds of manufacturing jobs in the U.S. and to hire talent from the local area as we work together to make Sherman the VCSEL Capital of the World.”
Finisar announced in December that it would expand its production of VCSELs at its new Sherman facility this year. VCSELs are small semiconductor devices that emit light vertically and measure the depth at which that light is reflected. That depth-sensing technology helps power Apple product features such as Face ID, Animoji, portrait mode selfies and proximity-sensing capabilities.
In a financial earnings call for the final quarter of the 2017-2018 fiscal year last month and transcribed by financial services company the Motley Fool, Hurlston said Finisar is looking into VCSEL uses beyond handheld technology and automotive uses.
“We continue to make progress with respect to uplift of the building and the ordering and receipt of capital equipment for our VCSEL laser fab in Sherman, Texas for 3-D sensing applications and still expect to be qualified in in-production using six-inch wafers by the end of the calendar year, which we expect to significantly increase our production capacity,” Hurlston said.
When asked whether Finisar would consider producing low power VCSELs, in addition to the high power versions it currently makes, Hurlston said it depends on customer opportunity.
“I think right now we’re on the higher power side of the equation,” Hurlston said. “We certainly can make low power, but I think it’s all going to depend on customer demand and customer opportunity.”
The Finisar CEO also clarified that he expects the earliest the Sherman facility could be in meaningful production would probably be October.
“But I think a lot is going to depend on customer calls and things that are somewhat out of our control,” Hurslton said. “But we’re currently planning to be early fourth quarter to be online.”
Finisar’s press release said the company has produced more than 300 million VCSEL die over its more than two decade history with the technology. Originally used in its optical communication products, Finisar has used VCSEL technology to help extend consumer and scientific applications.
The company press release said it has hired nearly 200 employees, including operations and support staff employees needed to begin production. Finisar said it expects to expand hiring later this year to support its plan to increase to high volume production.
“Obviously, we’re hiring a lot more people, training people, getting machines installed, etc.,” Finisar Chief Financial Officer Kurt Adzema said during the financial earnings call. “And I expect that number to increase as we get closer and closer to production.”
Incentives and abatements
In March, the Sherman Economic Development Corp. board of directors approved a $1 million incentive for Finisar. SEDCO will provide Finisar four payments of $250,000 each over a two year period as the electronic components manufacturer invests $160 million in capital equipment and construction in its Sherman facility.
The incentive agreement states the first $250,000 payment will be made after Finisar provides documentation of a local investment of at least $40 million. The three other payments will come when the company’s investment reaches $80 million, $120 million and $160 million, though each payment will also be at least six months apart.
That same month, the Sherman City Council unanimously approved a 10-year tax abatement and a five-year Chapter 380 tax rebate agreement for Finisar. City staff estimated the tax abatement agreement would save the company around $3.3 million in property taxes, and the tax rebate agreement would save it around $1.2 million.
The 10-year tax abatement agreement will give Finisar a 60 percent tax abatement for each of the first three years, a 55 percent abatement for each of the following three years and a 50 percent abatement for the final four years of the agreement. The five-year tax rebate agreement will see the city giving a grant back to Finisar after its full tax bill is paid in years 11 through 15. The grants will be for 45 percent of the taxes paid in each of the first two years of the agreement, 40 percent for the third and fourth years and 35 percent for the final year.
At the time, City Manager Robby Hefton explained SEDCO’s incentives are usually used to attract a company to the area, but the 15-year incentives from the city give Finisar a reason to stay in Sherman.
“The idea here is that if in years seven, eight, (or) 10, they’re on the bubble about things, having this economic incentive would help keep them here and have those people employed and then continue to invest here while they have this incentive in place,” Hefton said.
Finisar’s work at its new local facility is slated to include investments of between $20 million and $30 million in the building and land, and an additional $120 million in manufacturing equipment. The company began remodeling work on the building late last year. The company announced it was creating 500 new jobs in Sherman, but its tax abatement application showed it expected 587 employees once the facility is operational.