Rosenblatt: What Apple's Quest To Add More 3-D Sensing Applications Means For Suppliers

Apple Inc. AAPL could add more applications for its 3-D sending solution and launch some AR/VR applications later this year, according to Rosenblatt Securities. 

The Analyst

Rosenblatt has a Buy rating on the shares of Apple.

The Thesis

Apple is working to improve its 3-D sensing performance in order to support more applications, Rosenblatt's China telecom and IT analyst Jun Zhang said in a Thursday note.

The iPhone X, came with 3-D sensing capabilities, with a front-facing "True Depth" camera that enables Face ID.

Given the need for performance improvement, the Austrian company AMS — which supplies "optical path," a key component of the iPhone dot projectors that direct beams of lasers into the True Depth camera — may have to increase its average selling price due to the need for more complicated packaging process and diffractive optical elements, Zhang said.

This could make it harder for VSCEL Laser suppliers Finisar Corporation FNSR and II-VI, Inc. IIVI to qualify to ramp their volumes, the analyst said. 

Lumentum Holdings Inc LITE could be positioned to hold its share in the Apple market in the second half of this year, Zhang said. 

A 3-D Arms Race Among Smartphone Manufacturers

Rosenblatt is of the view that Apple is working with Sony Corp (ADR) SNE on a time-of-flight solution for rear camera support for VR/AR functionality, possibly positioning it to launch an iPhone with a rear ToF solution in 2019.

Alphabet Inc Class A GOOGL(GOOG) could meaningfully upgrade its Tango 3-D scanning function in the second half of the year, the analyst said. 

SenseTime, China's leading facial recognition technology, in which Alibaba Group Holding Ltd BABA has invested $600 million, could start developing facial recognition technology for ATMs and point-of-sale systems, according to Rosenblatt. 

Among the other Chinese smartphone OEMs working to incorporate 3-D sensing, Rosenblatt said Oppo's Find 9, which is expected to launch in July, would be the first Android smartphone to adopt a 3-D sensing structure light solution.

VIVO's adoption could be delayed until the end of the year, Zhang said. 

Huawei and Xiaomi are eyeing November and October launches, respectively, the analyst siad. 

"We believe that Samsung Electronics Co., Ltd. SSNLF could push 3-D sensing solutions to 2019 while just [including] a small upgrade to the ToF rear camera on the Galaxy Note 9 in the second half half of 2018." 

Price Action

Apple shares have added about 23 percent over the past year.

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Photo courtesy of Apple.