Apple signs $578M sapphire deal with GT Advanced Technology

Posted:
in iPhone edited January 2014
GT Advanced Technologies Inc. announced a multi-year, $578 million contract with Apple to supply advanced sapphire material.



The contract, detailed in GT's quarterly results announcement, involves the Arizona factory that Governor Jan Brewer announced would create 700 jobs and employ 1,300 construction workers.

Apple's investment is a prepayment funding the accelerated development of GTAT's "next generation, large capacity" Advanced Sapphire Furnace, which is designed to produce high quality sapphire material at a breakthrough low price.

"Based on 40 years of proven sapphire production and crystalline growth process technology," GT states, "the ASF combines a highly automated, low risk operating environment capable of producing consistently uniform sapphire boules that yield high quality material for a lower cost of ownership."

Apple is building the facility that will house the GT-owned ASF equipment, and GT will reimburse Apple over the five year contract, beginning in 2015. The contract stipulates a minimum level of capacity and involves supply exclusivity for Apple.

Apple's infusion of capital is critical for GT because production from the new ASF equipment is initially expected to generate much lower margins than the company has historically earned. However, following the Apple deal GT restated its 2014 revenue range to $600 to $800 million (up from 2013's revenue projection of roughly $550 million), noting that the "sapphire segment [is] expected to contribute approx. 80% of the year's revenue" and projecting 2014 revenues to double by 2016.



The deal provides Apple with a new supply of sapphire, which it currently uses in camera lenses and for the protective disk that serves as the Touch ID home button for iPhone 5s (depicted above). Sapphire is also used in LED production, as GT describes in the above video.

Sapphire, a crystalline form of aluminum oxide, can also be used to create an advanced virtually unscratchable alternative to silicon dioxide conventional glass, as described below. It's a potential alternative to Corning's potassium-enhanced Gorilla Glass, which Apple currently uses in its iPhone screens. Sapphire can be made thinner, and therefore lighter, but has historically also been more expensive.



"We are very excited about this agreement with Apple," GT's president and chief executive Tom Gutierrez said in a statement, "as it represents a significant milestone in GT's long term diversification strategy."
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Comments

  • Reply 1 of 54
    alfiejralfiejr Posts: 1,524member
    no mention of GT's patents. but that has to be part of the deal too ...
  • Reply 2 of 54
    gatorguygatorguy Posts: 23,423member
    alfiejr wrote: »
    no mention of GT's patents. but that has to be part of the deal too ...

    GT has to pay Apple back for the build costs beginning in two years. Apple didn't buy the company so unlikely to have bought the patents. It probably has more to do with Apple needing to ensure a steady supply and no vendors willing to make the upfront investment in plant to guarantee it.
  • Reply 3 of 54
    maestro64maestro64 Posts: 5,036member

    This is an interesting twist. Most manufacturers will changer the OEM a fee to develop something for the OEM and the OEM can pay it upfront or amortized it over all the product they buy. In this case Apple is paying the up front cost for this company to go off and do the engineering to build stuff for them but they have to pay Apple back for the investment. 

     

    I have not seen that one done before.

  • Reply 4 of 54
    Sapphire watch crystals....hmm
  • Reply 5 of 54
    It's definitely not only for TouchID, but iWatch faces. They'd need a ton of glass for them, and sapphire + liquidmetal = nearly indestructible, yet literally a jewel of a piece.
  • Reply 6 of 54
    cnocbuicnocbui Posts: 3,613member

    I doubt this is for home buttons and camera windows - not at that price.  Apple must have something else in mind.  The watch?

  • Reply 7 of 54
    Sapphire glass has no elasticity of any measure without fracturing. This is the sensor interfaces for all future hardware that most certainly will include the Mac Mini, Mac Pro, iMac, iPad, iPhone, iPod Touch, AppleTV, etc.
  • Reply 8 of 54
    Thinner. Lighter. More expensive. Higher quality.
    Sounds like apple
  • Reply 9 of 54
    This is a great move by Tim Cook with Apple's dollars! Tim has peered into the future and has seen possible bottlenecks in his supply chain that could cause problems for Apple. Sharp is no longer independent. Neither is Corning. Both companies have the same Apple competitor as a partner. With this five-year exclusive supply investment, Apple can chart a glass path that does not require Gorilla glass from Corning. If we learn Apple has invested in an LCD company, Sharp will be cut out of the supply chain. And with 4K displays needed for the upcoming Mac Pro, I think there will be more announcements made in the coming weeks. Stay tuned folks!!!!!
  • Reply 10 of 54
    jungmarkjungmark Posts: 6,921member
    This capital investment value >> icahn's buy back value ( not talking about absolute dollars)
  • Reply 11 of 54
    irelandireland Posts: 17,785member
  • Reply 12 of 54
    Tim Cook is kicking Icahn's butt.

    This is the best way to spend Apple's billions - to spend on the supply and manufacturing chain so that Apple can make even more billions. This is textbook Tim Cook.
  • Reply 13 of 54
    cnocbui wrote: »
    I doubt this is for home buttons and camera windows - not at that price.  Apple must have something else in mind.  The watch?

    Definitely not. Apple wouldn't pour half a billion dollars into something with no proven market. This must be for the various "i" device cameras and home buttons. IMO, this alone indicates the strength of Apples product pipeline.
  • Reply 14 of 54

    In one move, Apple has put its competitors into a supply chain vise.  Sounds to me like Apple wants to transform sapphire from a low volume, high margin material into a higher volume, lower margin material that competitors will not be able to match in the short-term without substantial investments of their own.  The rumors of sapphire glass replacing Gorilla Glass have been stirring for at least the past year, and with their camera lenses and Touch ID buttons already using sapphire glass, adding the material to the touchscreen would be the logical next step for Apple. 

     

    Apple is both willing and able to push the envelope with the use of materials to differentiate their products (and support higher margins).  And they have a big enough cash reserve available to build significant manufacturing capacity without depressing margins or taking on debt in the process.  Do any Android OEMs seem willing to go in this direction, given the significant upfront capital outlay required and the low margins for most Android OEMs? 

  • Reply 15 of 54
    Sapphire crystal screen + Liquid Metal back is going to make a hell of a iPhone 6. Virtually indestructible. Stay tuned folks. And read this:

    http://acceptingpayments.quora.com/Apple-Partners-With-Sapphire-Manufacturer-To-Build-A-Joint-US-Plant-In-Arizona
  • Reply 16 of 54
    irelandireland Posts: 17,785member
    Definitely not. Apple wouldn't pour half a billion dollars into something with no proven market. This must be for the various "i" device cameras and home buttons. IMO, this alone indicates the strength of Apples product pipeline.

    I disagree. There's nothing unproven about this product. I'd say people's instincts are correct and this investment is for something besides the correct uses. Apple should seriously considering buying this company. If possible I'd love to longer require screen protection as a rule.
  • Reply 17 of 54
    Samsung will either fight to have Sapphire 1st or right after iPhone. *Not a joke!

    Also I hope sapphire can finally be more impact friendly since that is the biggest caveat of iPhone/iPad.
  • Reply 18 of 54
    irelandireland Posts: 17,785member
    tylerd wrote: »
    Sapphire crystal screen + Liquid Metal back is going to make a hell of a iPhone 6. Virtually indestructible. Stay tuned folks. And read this:

    http://acceptingpayments.quora.com/Apple-Partners-With-Sapphire-Manufacturer-To-Build-A-Joint-US-Plant-In-Arizona

    That phone design is so badly thought out and has zero advantages over physical volume buttons and a few negatives. And laser cutting a block of sapphire crystal doesn't sound plausible either given that you can't laser cut to a particular depth like that in any material that I know of.

    The guy mentions that he is a shareholder, but that doesn't automatically tell me he is a legit person.

    Apple will deploy Sapphire as the full screen in iPhone 6. In fact one could say that the iPhone 6 will be basically a laser carved Sapphire rectangle with a liquid metal backing perhaps with some Graphene in use. It will be the most durable smartphone ever made. Being made of pure Sapphire gem and liquid metal the entire iPhone will be reinvented and reconcieved.

    What in the name of God is he talking about? I'm going to go out on a limb and predict that none of that will come through. Not one bit. A sapphire screened iPhone makes sense, but wouldn't that have happened by now? And a liquid metal machined chassis makes way more sense than a sapphire body. And that would be cost prohibitive compared to aluminium.
  • Reply 19 of 54
    If you watch the video, one black of sapphire is going to make at most 500 iPhone screens. Probably less. Apple would need 1000 machines to meet production needs. Probably more. The current plant has only 60 machines. So very unlikely for iPhone screens. What would completely lose performance or easily scratch? Camera lenses. Touch ID sensors. A watch crystal that could bang into walls.
  • Reply 20 of 54
    aaronjaaronj Posts: 1,595member

    Yeah, as cool as a Sapphire iPhone screen would be, I just can't see the production reaching the needed scale anytime soon.  Apple sells 10s of millions of iPhones per quarter!  Either they figure out a way to make this stuff much more quickly and easily, or we're still a ways away from Sapphire screens.

     

    Either that, or I completely misunderstand how this is all working.

     

    I can easily see this being used for TouchID and the possible watch.  As has been talked about a great deal here in other threads, in the modern world a watch is really a fashion accessory more than anything.  And these "smart watches" are just hideous, so far.  So, IF -- and I still think that's a big if -- Apple chose to make some sort of smart watch, it would also have to look damned good, and not like a reject from a TNG episode.

     

    Maybe this could help with that.

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