Recently AllThingsD reported that Apple has entered into a multiyear alliance with GT Advanced Technologies that will see the company manufacturing sapphire material at a new Apple facility in Mesa, Ariz. Apple will pay GT approximately $578 million.
According to the report:
During a Monday earnings call, GT revealed a few bits of data that suggest it is rejiggering its entire business model around sapphire production. As Cantor Fitzgerald analyst Brian White noted today, GT’s sapphire business accounted for 11 percent of its year-to-date sales — about $28.9 million in revenue. But, in forecasting 2014 revenue, the company said it expects to make $600 million to $800 million, with 80 percent of those sales attributable to its sapphire business.
In other words, following the signing of this new deal with Apple, GT’s sapphire segment will not only become the company’s main source of revenue, it will also drive a stratospheric spike in it. 2014 sapphire-related revenue at GT is expected to hit $480 million at the low end, and $640 million at the high end. That’s a 15x to 16x increase.
Digitimes speculates that all this Sapphire is heading to the next generation iPhones.
US$578 million can be used to procure 1,930-2,890 sapphire growing furnaces for a monthly production of 5.28-7.90 million mm of 2-inch-equivalent sapphire ingots, Digitimes Research indicated. Such a volume of sapphire ingots could be used to make screen covers for 33.79-50.56 million 5-inch iPhones a year, accounting for 17.8-26.6% of the estimated 190 million iPhones to be shipped in 2014.
Sapphire, specifically synthetic, manufactured sapphire has several properties which make it of interest to Apple. First of all, sapphire is superior to glass, even Corning’s Gorilla Glass material, in several ways. Synthetic sapphire has no color, as it’s a single crystal grown to be optically transparent — making it look very similar to glass. But it’s also extremely hard — 9 on the Mohs scale — which means better scratch resistance.
“First, this material must be extremely strategic, says Creative Strategies Analyst and Techpinions columnist Ben Bajarin. “It is necessary for touch ID because it is extremely scratch resistant. If a scratch got on your thumb scanner it wouldn’t work. So then the question becomes what else may they want or need to use a scratch resistant screen for. This is where the wearables idea or watch comes in.”
There has been a lot of chatter about Apple and wearables, and it is indeed working on something in that arena. Apple’s M7 motion coprocessor likely has something to do with it, and there are some indications that it’s being worked on by both Bob Mansfield and ex-Adobe CTO Kevin Lynch.
Watches, a popular wrist-mounted wearable you may have heard of, often use sapphire for their face covers because of their durability. They simply get knocked around more than phones do.
“This, for now, is more about smaller screens than bigger. But perhaps it is also a learning process or investment for them to take this to other screens,” says Bajarin.