GTAT has signed a multi-year sapphire materials agreement with Apple.
Possible impacts on the industry:
1. The fourth quarter is tradtionally the LED sector's low season, during which sapphire prices should come down. However, 2-inch sapphire pricing is expected to inch up during the fourth quaeter of this year to reach US$4-4.5, as the prospect of sapphire being used in portable devices looks good.
2. Applications include: smartphone, tablet home buttons, camera lens, and even covers for iWatch and smarphones.
3. Why GTAT? One of the reasons is the US government hopes companies can move their production back to the US and create job opportunities. Another reason: GTAT's ingot growing technology can produce sapphire for large-size screens.
4. To make sure Apple will use sapphire as covers for tis devices and not competiting technologies (such as Corning's Gorilla Glass), the contract signed between Apple and GTAT requires Apple pre-pay US$578 million for equipment purchase.
5. Digitimes Research believes the US$578 million, if it's going to be all spent on buying ingot growing furnaces, will be enough to buy 2,000 units, or even more. The furnaces are estimated at US$200,000 to US$300,000 per unit, rather than the usual market price of US$600,000 quoted by GTAT.
6. The number of furnances seems high. If GTAT's target is to produce large-size 200kg ingots, monthly output could reach 5 million mm of 2-inch equivalents (yield rates not taken into consideration).
7. But if the output is meant to mainly cater to Apple's 5-inch handset screens in 2015, with the phone shipments estimated at 250 million units, the sapphire ingot capacity will still be 50%b short of demand.
8. Impact on the supply chain: Apple usually has second sources for its component supply. That means, Apple may find sufficient sapphire supply from other suppliers.
9. Potential beneficiaries: Including furnace suppliers for GTAT, KY ingot growing technology providers, and South Korea-based STC, who uses VHGF technology.
Click here to see GTAT's annoucement of the deal.