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GT Advanced Technology Is Poised to Benefit from Apple

May 09, 2014 | About:
FinanceGuru

FinanceGuru

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At the end of 2013, GT Advanced Technologies (GTAT) signed a $578 million deal with Apple (AAPL), under which the company was asked to install and operate the world's largest sapphire-crystal manufacturing plant. Since Apple didn't promise to buy any of the sapphire that GT Advanced Technologies produced, the company's success largely depends on the upcoming iPhone 6.

Although it hasn't been confirmed that Apple's new iPhone 6 will come with a sapphire display, many reputed sources like Forbes and Canaccord think otherwise. However, if you do not trust the rumors, there are many other reasons to believe that the iPhone 6 will indeed come with a sapphire display. Let's take a look at those reasons.

The Problems Look Solved

The two major problems with using sapphire in smartphones are high cost and oil affinity. However, if you take a look at Apple's recent patent filings, you will be convinced that the Cupertino giant has solved these problems. Apple recently patented a technique which involves fusing a thin sapphire laminate sheet with cover glass. This means that Apple will not have to manufacture pure sapphire displays for the iPhone 6, which will ultimately bring down the cost of sapphire displays.

However, Apple isn't done bringing down the sapphire manufacturing cost. The company recently filed two more patents called "continuous sapphire growth" and "heat exchangers in sapphire processing" patents. These new techniques offer a more proficient and cost-effective way of producing sapphire. Apple is likely using these inventions in their new sapphire plant in Arizona. The Arizona sapphire plant will now exploit and accumulate geothermal energy which will be used to operate the furnaces. Thus, the plant will now be able to produce larger amounts of sapphire due to the increased heat efficiency. In addition, this technique will also reduce the amount of waste produced.

Moving on, Apple has also taken care of the oil affinity problem. Last month, Apple filed an "oleophobic coating on sapphire" patent. As the name suggests, oleophobic means oil-repellent, and this technique is expected to help the company produce smudge-proof sapphire screens.

All these filings point to the fact that Apple is vigorously looking for ways to successfully implement sapphire displays in its upcoming devices. Even though these rumors are yet to be confirmed, it's looking more and more likely that Apple will make the switch from Corning (GLW)'s Gorilla Glass to sapphire.

Corning Is Scared

Apple's shift from Gorilla Glass to sapphire display will undoubtedly hurt Corning, and the company is clearly nervous about it. Tony Tripney, a senior VP at Corning, recently launched a blistering attack on the prospects of sapphire. He touted Gorilla Glass as the best and made the following claims as to why it is better than sapphire.

  • Sapphire is about 10 times more expensive than Gorilla Glass slates.
  • Sapphire is about 1.6 times heavier than Gorilla Glass.
  • Sapphire transmits less light than Gorilla Glass.
  • Sapphire is so hard that manufacturing proper screens out of it requires pricey machines.
  • Gorilla Glass can take 2.5 times as much pressure as a sapphire screen before breaking.
  • Sapphire display will shatter easily as compared to Gorilla Glass.

This clearly confirms that Corning is really worried about losing Apple, especially when you consider the fact that most of these statements are ambiguous.

Tripney is basing his argument on the fact that phones will only have sapphire as the sole protective glass; however, that's not the case. As I have stated above, Apple has already patented a technique which involves fusing a thin sapphire laminate sheet with cover glass. This fact negates almost all of Tripney's arguments.

Furthermore, the estimated cost for an iPhone-sized sapphire screen lies in the range of $9 to $12, which isn't "10 times" more expensive than a similar Gorilla Glass which costs a little less than $3. In addition, Apple is constantly working on bringing down the cost of producing sapphire, and the recent patent filings indicate that the production price will fall further.

Corning's vague claims are another strong indicator that the company has already lost its spot in the upcoming iPhone to GT Advanced Technologies. Also, Apple is also looking to double the production in its Arizona production plant. AppleInsider noted that the site will contain 1,700 furnaces to make sapphire, way more than previously reported 938 furnaces.

The company's 938 furnaces were enough to produce about 200 million 5-inch iPhone displays, which would have easily satisfied the annual demand for the iPhone. But the massive increase in production indicates that Apple may want to use sapphire in other iDevices as well. Thus, it looks certain that many of upcoming Apple gadgets can come with a sapphire display.

Conclusion

It's looking more and more likely that the iPhone 6 will have a sapphire display, and investors can expect to hear the official announcement soon. Shares of GT Advanced Technologies will break out yet again when these rumors finally materialize. Hence, investors should consider adding GT Advanced Technologies to their portfolios before the official announcement is made.


Rating: 4.7/5 (3 votes)

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Comments

BowenR
BowenR premium member - 5 months ago

Thanks for the article.

What do you think is the reason for the strong sell off in GTAT recently?

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