Archive for March, 2014

by Matt Margolis

During the March 14 GT Advanced Technologies New Product and Technology Briefing, GT’s CEO Tom Gutierrez was asked whether or not Hyperion 4 was included within the exclusivity clause with Apple.  His response was that Hyperion was not currently covered within the exclusivity under the Apple agreement.  The million dollar question that remains open is, what is covered or not covered under the Apple exclusivity clause within the current contract?

According to the contract GTAT cannot enter into performing the “same” or “similar Development Services in the Consumer Electronic Field” while performing “Development Services for Apple, and for 3 years following the date that GTAT ceases to perform the Development Services for Apple”.  Development Services definition seems to be very specific and I would correlate this to mean that GT cannot enter into a materials agreement to grow sapphire and develop sapphire materials for consumer electronics while performing the same service for Apple or until 3 years after GT ceases to grow sapphire and develop sapphire materials for Apple.

The next part of the exclusivity contract language may require some legal interpretation.  In addition to restricting GT’s ability to grow sapphire materials for the Consumer Electronic Field the contract also states GT cannot “assist, enable or in any way facilitate any other person or party in its provision of the same or similar Development Services for any other person or party”.  This could be interpreted to mean that GT cannot sell any ASF sapphire growth furnaces that could land in consumer electronic products, which means that GT’s ASF furnaces could only be sold for LED purposes.  Another interpretation on the other end of the spectrum is that GT simply cannot enter into a sapphire materials contract similar to Apple within the Consumer Electronic Field.  The key words to digest in the second part of the exclusivity contract language are “assist, enable and facilitate”.  When GT sells a ASF furnace to a customer they do go to the customer site and train the customer to help them maximize their results using GT’s equipment so I’m not sure where to draw the appropriate line.   I’m curious what everyone else thinks?

 

1.4.   GTAT agrees that while performing the Development Services for Apple, and for 3 years following the date that GTAT ceases to perform the Development Services for Apple, it will not to the best of its knowledge, after conducting reasonable due diligence, perform the same or similar Development Services in the Consumer Electronic Products Field for any other person or party, nor will GTAT assist, enable or in any way facilitate any other person or party in its provision of the same or similar Development Services for any other person or party. “Consumer Electronic Products” [***].

Intellectual Property (IP)

According to the master supply agreement Apple has granted GTAT a “limited, non-exclusive, worldwide, royalty-free license to Apple’s IP rights including Apple’s patents and/or any other trade secrets, data or materials that are necessary to perform the Development Services and other obligations under the Agreement.  What this means is that every patent that Apple has filed related to sapphire and various other uses, if GT needs to use them as a result of Apple’s development services needs than GT will have the rights to do so.


4.1.   Except as otherwise provided herein, no right or license to Apple’s Intellectual Property Rights is granted or implied as a result of the Agreement or the Development Services, except that Apple hereby grants to GTAT a limited, non-exclusive, worldwide, royalty-free license to use Apple’s Intellectual Property Rights (including Project Work Product) solely to the extent necessary to perform Development Services and other obligations under the Agreement.  The transfer or license of Project Materials or GTAT Background Technology provided herein does not constitute a public disclosure. “Intellectual Property Rights” means the rights in and to all (i) U.S. and foreign patents and patent applications claiming any inventions or discoveries made, developed, conceived, or reduced to practice, including all divisions, substitutions, continuations, continuation-in-part applications, and reissues, re-examinations and extensions thereof; (ii) copyrights; (iii) unpatented information, trade secrets, data, or materials; (iv) mask work rights; and (v) any other intellectual or other proprietary rights of any kind now known or hereafter recognized in any jurisdiction.

On the GTAT side of the fence Apple will be sole property owner to “all results, reports, findings, conclusions, work papers, notebooks, electronic records, samples, prototypes, deliverables, and any other information or materials,” that arise from the performance of the Development Services by GTAT.  However, Apple will not have the rights to GTAT Background Technology, which includes Hyperion 4.

All results, reports, findings, conclusions, work papers, notebooks, electronic records, samples, prototypes, deliverables, and any other information or materials in any form or format arising out of performance of the Development Services by or for GTAT (the “Project Work Product”) except GTAT Background Technology (defined below) will be the sole property of Apple and will become part of the Confidential Information to be protected under the Agreement.

What will not be the sole property of Apple will be GTAT’s Background Technology, which will be “will be owned by GTAT and is not being transferred or assigned to Apple under the Agreement”.  GTAT’s Hyperion 4 technology falls within GTAT’s Background Technology and is it therefore not currently covered within GT’s exclusivity agreement with Apple just as GT’s CEO indicated so clearly during the March 14th Technology Briefing.    GTAT’s Background Technology includes, inventions, data, improvements, discoveries, etc. that were “created or developed by or for GTAT either (i) prior to the date of the Agreement or (ii) subsequent to the date of the Agreement,” assuming that these inventions were “created or developed by GTAT separately and independently” from GTAT’s Development Services work performed on behalf of Apple or any “Apple Confidential Information or Project Materials, and all Intellectual Property Rights”.  Essentially any inventions, processes and methodologies that GT had already developed prior to their agreement with Apple will continue to be owned by GT and the rights to these technologies will not be transferred to Apple.  I have read some comments that GT gave away everything in the deal but it looks like GT will retain the rights to all of their proprietary knowledge and inventions related to sapphire growth, inspection and processing methodology and know-how.

“GTAT Background Technology” means GTAT’s inventions, data, improvements, discoveries, ideas, processes, methodologies, formulas, techniques, works of authorship, trade secrets and know-how, whether patentable or not, conceived, reduced to practice, authored, or otherwise created or developed by or for GTAT either (i) prior to the date of the Agreement or (ii) subsequent to the date of the Agreement if conceived, reduced to practice, authored, or otherwise created or developed by GTAT separately and independently of its provision of any Development Services and any Apple Confidential Information or Project Materials, and all Intellectual Property Rights therein or thereto.  GTAT Background Technology is and will be owned by GTAT and is not being transferred or assigned to Apple under the Agreement.  For the avoidance of doubt, any Sapphire Technology that is conceived, reduced to practice, authored, or otherwise created or developed by or for GTAT using (i) any of Apple’s Confidential Information or (ii) any GTAT personnel or contractors who had access to Apple’s Confidential Information will be deemed Project Work Product.

 

 

Full Disclosure: I am long GTAT and have no plans to buy or sell any holdings in the next 72 hours

 

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by Matt Margolis

 

Appleinsider recently broke a story that Apple is planning to expand operations in Mesa by possibly adding a second building to expand production (see Appleinsider’s comments in the image below).  The expansion of the current facility along with a target date of June makes complete sense, but expanding to a second building just does not add up at this time.

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GT Advanced built a 20,000 square foot sapphire production facility in Salem, MA that was completed in 2011. The facility holds over 100 furnaces including over 80 ASF sapphire growth furnaces and there is plenty of room to spare to add additional furnaces, if needed.  The Mesa Sapphire Plant has 1.3 million square feet of production space or the equivalent size of 65 of GT’s Salem sapphire production facilities.  GT’s Salem sapphire production facility can hold over 80 furnaces and if we assume the same space to machine ratio within the Mesa facility the maximum sapphire growth furnace capacity inside of Mesa is over 5,000.  Appleinsider reported (see image below) that the Mesa sapphire facility will be equipped with 1,700 furnaces, which by themselves would only fill 1/3 of the Mesa facility and it’s more than likely in my opinion that the Apple has only completed one or two of the planned expansion phases within the Arizona facility.

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According to the Mesa facility lease agreement between GT Advanced and Apple will deliver the Mesa facility to the tenant (GT Advanced) in multiple phases as each phase becomes ready for delivery to the tenant.  The Mesa delivery of the premise from the landlord (Apple) to the tenant (GT Advanced) is broken into 9 phases and they are referred to within the agreement as Phases 1 to 6 and Phases A to C.  Appleinsider reported that the construction would be finished no later in June and based on the lease agreement between the two companies it seems more than likely that Apple may be targeting June to complete the remaining delivery phases inside of Mesa.  Once the remaining delivery phases are complete, Apple’s tenant GT Advanced to can grow sapphire and process sapphire boules within the remaining dedicated delivery zones (phases).

 

1.2.1       Phases. Landlord anticipates that it will deliver possession of the Premises to Tenant in multiple phases as each phase of the Premises (each, a “Phase”) becomes ready for delivery to Tenant.  As used in this Lease, the term “Current Demised Premises” shall mean, at any given time, the Premises or the Phase(s), and the portion of the Premises corresponding to such Phase(s), of which Tenant has accepted delivery in accordance with Section 1.4.  Exhibit C describes each of the nine (9) Phases of the Premises.  The Phases are designated on Exhibit C as “Phase 1”, “Phase 2”, “Phase 3”, “Phase 4”, “Phase 5”,”Phase 6”, “Phase A”, “Phase B” and “Phase C”.  Except as expressly set forth in Sections 1.2.2, 1.3 and 1.4, Landlord shall deliver each Phase of the Premises to Tenant in its then “as-is” condition without any representations or warranties regarding condition.

The master development and supply agreement between Apple and GT Advanced sheds some significant light on the contracted expectations between both companies.  According to the master development an supply agreement, the expectation is that “GTAT will at its expense, purchase, install, test, maintain and operate all equipment necessary to manufacture and deliver the development deliverables and the Goods”.  Additionally, “before placing orders for or purchasing any materials for use in Goods that are comprised of multiple components, GTAT will provide for Apple’s review and approval, a complete engineering bill of materials for such Goods…”.   The language in this agreement appears to indicate that GT will not only be responsible for development deliverables (sapphire boules) but the delivery of the goods (sapphire screens, sapphire components, etc.).

 

21.1.  Unless agreed otherwise in an SOW, GTAT will, at its expense, purchase, install, test, maintain and operate all Equipment necessary to manufacture and deliver the development deliverables and the Goods.  GTAT will also secure all materials in accordance with applicable Specifications necessary to timely manufacture and supply the development deliverables (pursuant to Attachment 2) and the Goods.  Upon Apple’s request, GTAT will purchase materials directly from Apple, and, at Apple’s request, will provide Apple with (i) weekly reports by part number specifying demand for such materials for the immediately following 12-week period; and (ii) weekly receipt logs of any such materials.  Before placing orders for or purchasing any materials for use in Goods that are comprised of multiple components, GTAT will provide Apple, for Apple’s review and approval, a complete engineering bill of materials for such Goods, listing the GTAT part number(s), lead-time(s), and cost(s) of each material therein.  Except for amounts due pursuant to a Letter of Authorization, the applicable SOW or Purchase Order, Apple will not be responsible for any costs associated with the materials.  “Equipment” means fixtures, tooling, test equipment and any other equipment used in connection with the development, manufacturing, testing, packaging, delivery or servicing of the development deliverables or Goods.  “BOM” means the engineering bill of materials that Apple creates and approves for the development deliverables or Goods.

The master development and supply agreement also indicates that GT will likely be responsible for storing goods for just-in-time delivery at an Apple Hub.  An Apple Hub is defined as a. “Apple-approved facility located at or near Apple-specified manufacturing or distribution facilities, or other Apple-specified location”.

13.   Hubs.  As agreed in any SOW, GTAT will store Goods in Hubs before their Forecast delivery date to support just-in-time delivery of the Goods.  GTAT will: (i) bear all costs associated with warehousing Goods in Hubs; (ii) maintain a sufficient inventory of Goods in the Hubs to satisfy the requirements of the then current Forecast; (iii) ensure that the Authorized Purchaser or its carrier(s) may withdraw Goods from the Hubs as needed; (iv) fully insure, or require the Hub operator to fully insure, all Goods in transit to or stored at a Hub against all risk of loss or damage until such time as the Authorized Purchaser takes title to them; and (v) require that the Hub operator take all steps necessary to protect all Goods in a Hub consistent with good commercial warehousing practice.  “Hub” means an Apple-approved facility located at or near Apple-specified manufacturing or distribution facilities, or other Apple-specified location.

 

The “9” Delivery Phases & Multiple Components within Mesa Takeaway

The “9” delivery phases (1 to 6 and A to C) within the Mesa facility are likely for specific products and/or sapphire components.  If you are going to design a manufacturing plant it would make sense to zone off area based on the specific sapphire “form factor” and the required finishing technique(s) to process the finished sapphire good.  GT’s former CFO Richard Gaynor summed up the “form factor” benefits perfectly during GT’s Q4 2012 conference call, “One of the benefit of the technology that we have is that it can actually change the form factor of the boules that you produce. And so you can actually customize the size of the boule to the application you’re trying to build for”.

In January 9to5Mac reported that Apple was hiring for iPhone/iPad manufacturing design engineers for the Mesa, AZ sapphire plant.  The master development and supply agreement specifically calls out how GT Advanced will handle Apple “goods” that are comprised of multiple components.  The iPhone/iPod engineering job posting in addition to the contract language regarding multiple components certainly send a strong signal that the Mesa sapphire plant will not be limited to just the iPhone.  I have thought for sometime that Apple would refresh the iPod alongside the upcoming iPhone in 2014.  The size of the current iPods and iPhones are nearly identical and it makes sense that you could grow “formed” sapphire boules for “multiple components” (iPhone & iPad) within the same “good” (sapphire boule).

The various contract agreements between GT Advanced and Apple indicate that a lot of activity is going to occur inside of the Mesa sapphire plant.  GT Advanced appears to be responsible for purchasing and installing the ASF equipment, growing the sapphire boules, producing the finished goods and shipping and storing the goods at an Apple approved facility.  At this point it is still anyone’s guess as to what exactly will be produced from the Mesa sapphire plant, but the “9 phases” and the mention of “goods with multiple components” certainly indicate that the scope of the Mesa operations may include all of Apple’s iDevices and not just the next generation iPhone and or iWatch.

 

 

Full Disclosure: I am long GTAT and have no plans to buy or sell any holdings in the next 72 hours

I just returned from a well needed vacation and I am officially back to sleuthing.  One of the first items I want to draw attention to is the confidentiality agreement that GT Advanced signed with Apple on August 24, 2012, which was referenced within the Master Development and SOW Agreement between Apple and GT (see image below). While the exact date is not relevant by itself, the date does establish a starting point for the seriousness of Apple and GT’s relationship.  I also went back and reviewed the comments made by GT management during the Q3 2012 conference call right after the confidentiality agreement with Apple was signed to see what kind of signs management gave investors related to sapphire screen pricing and expected timing.  At this point for those of you who follow my analysis and GT advanced closely it should not come as a surprise to anyone that GT’s management provided a lot of color on the pricing and expected timing during the November 2012 conference call.

 

Screenshot - 3_28_2014 , 9_56_57 PM

 

 

Q3 2012 Conference Call Notes (November 2012)

 

There’s been a lot of discussion regarding the cost of sapphire for cover screens and question as to whether the cost range that we recently published of $10 to $20 above current glass solutions is achievable.

The total cost for sapphire cover screen can be divided into 2 categories: crystal growth and fabrication, with each currently representing about 50% of the total cost.

I’m just saying that, that’s a factor what the throughput of the furnaces might be in terms of cycle time, what the cost of the consumables might be, etc.

There are already a lot of tools in the fabrication area that will have application, that are either depreciated significantly or are already in place and some of those operations that we’ll support.

There are some really innovative technologies that are being developed by ourselves and our fabrication partners that would bring the back end down very substantially in the fabrication area.

I expect that the ratio between the crystal growth side and the fabrication side to change substantially as these technologies get put on-board.

But we’re confident, okay, that we can be inside that box. And we’re also confident that, that’s just the initial box.

And unfortunately, with the big smartphone players, you won’t know until it happens.

We’ll start laying down assets second half of next year, but you won’t see a high-volume phone with sapphire on it, I don’t think, until 2014. And so that’s consistent with the time line that we’ve put in place.

 

I provided a lot of information that was given during GT’s Q3 2012 conference call, so what right?  Well one of the first points I want to draw attention to is the price $10-20 above current glass solutions costs.  The number widely used has been $3 per screen for the current glass solution.  If we take midpoint of $10-20 it is $15 above the $3 per screen current price.  As of November 2012 GT could grow sapphire boules and produce sapphire cover screens for approximately $18 a screen.  Add in your 25% margin and they could sell to Apple for $22.50 per screen.  GT management also stated that the price was a 50/50 split between crystal growth and fabrication which would be $9 to grown and $9 to fabricate for a total cost per screen of $18.

Eric Virey from Yole Développement  early this month modeled the price of sapphire screens.  Eric assumed GT would grow the sapphire boules and deliver a sapphire slabs (bricks) for $6.40 per screen and sell for $8.00 per screen (see image below).   The sapphire slab end up in China where it would be sliced and polished by Apple subcontractors. The finished screen’s estimated cost is $17 with potential to be as low as $13 per screen in the mid-term future.

Screenshot - 3_28_2014 , 10_32_57 PM

May 2013, Eric Virey estimated that the cost of sapphire screen was $22 but could ultimately reach $13 per screen over time (see quote and chart below).  What is even more interesting is estimated mix of sapphire growth versus fabrication costs compared to GT guidance of 50/50 split.  Virey estimates that the sapphire growth costs as of May 2013, were $9 for crystal growth and $13 for fabrication, which represents a 40/60 split versus 50/50 from GT management.  If I bring down the fabrication cost estimate from $13 to $9 the split is now 50/50 and the total cost is estimated at $18, equal to GT management’s guidance.

Today a cell phone cover glass costs around $3. Sapphire will always be more expensive than this. Yole Développement has also produced a detailed cost simulation, showing that today it’s possible to make a sapphire cover for around $22. That must fall. In an aggressive and optimistic yet realistic hypothesis we predict that the cost could go down to below $15 within two years, and ultimately could reach $13.

 

Screenshot - 3_28_2014 , 11_36_05 PM

 

The wall street  analysts have not gotten down to the granular details related to if GT will sell sapphire slabs or if GT will grow the boules, slice the sapphire and polish the screens.  Many of them don’t even have a unit or cost estimate per screen that has been published.  I think it is very important to know who will be ultimately making the sapphire screens and what GT’s selling price per screen will be to Apple.  The cost of the screen will impact Apple’s margins, but will the price of sapphire screens hurt the bottom line as much as some analysts are expecting?  The short answer is no and I will explain why.

GT in 2012 was pricing in the cost of sapphire screens using the previous generation ASF furnaces (115 KG) as well as the previous generation diamond wire saw from Meyers Burger.  Additionally, the raw materials supply chain for Alumina had not been established.  If we fast forward to March 2014, GT is now using a (200 KG+) furnace which represents an improved yield of 74% from the ASF 115 KG Furnace.  GT will likely be using the next generation Meyer Burgers diamond wire cutting saws that will substantially reduce kerf loss and improve the fabrication costs to make a sapphire screen.  A $80m order was received by Meyer Burger for diamond wire cutting saws in December 2013 and it is widely believed that the order was ultimately headed for Apple’s Mesa, AZ sapphire plant.  GT acquired exclusive rights to Intego GmbH sapphire cover inspection tool on March 13, 2013 that is expected to increase the amount yielded (useable portion) from a sapphire boule, which will lower the cost of growing and fabricating sapphire screens.  According to GT’s comments (see image below) regarding the LED Intego inspection tool, it provided an improved yield of 20-25% in the lab and I would expect the sapphire cover inspection tool to show similar yield improvement .  It has also been evidenced (see image below) that GT has already received several Intego sapphire cover inspection tools so this technology that was in R&D in 2013 is now ready to go in 2014.

Screenshot - 3_28_2014 , 11_12_46 PM

Screenshot - 3_28_2014 , 11_48_39 PM

So what is the cost of sapphire cover screens?   GT’s improvements to the sapphire screen production cost estimates include; sapphire boule is now 74%+ larger than it was in 2012, the inspection tool that improves the yield by 20-25% since 2012 (useable boule), Apple’s negotiations and establishment of the current raw material supply chain may reduce the cost of raw materials by 20-25% from 2012 estimates and lastly the next generation of Meyer Burger diamond wire cutting saws will substantially reduce kerf above and beyond the previous diamond wire saws that were commercially available in 2012.   I’ve been modeling out the cost of a sapphire screen at $8 for a final ASP of $10 to Apple.  Given the facts at hand, I feel comfortable that my cost estimate for 2014 is reasonable.  A $7 increase ($10 cost versus $3 for glass) to Apple’s cost structure will certainly impact Apple’s gross margins, however my estimated sapphire screen incremental cost estimate of $7 per screen is probably half or one-third of what the street is currently modeling for the cost of Apple’s sapphire screens.   So yes, sapphire screens will have a negative impact on Apple’s gross margin but sapphire screens will not “tank” the iPhone 6 margin profile by any means.  Below are my key points regarding pricing summarized in a chart as well as a repeat of one comment made by TG during the Q3 2012 conference call.

Screenshot - 3_29_2014 , 12_37_02 AM

Screenshot - 3_28_2014 , 11_59_26 PM

TG’s comment during the November 2012 during the Q3 2012 Conference Call

But we’re confident, okay, that we can be inside that box ($10-20 above current glass solutions). And we’re also confident that, that’s just the initial box.

 

 

 

~Obscure Analyst – 3/29/14

 

Full Disclosure: I am long GTAT and have no plans to buy or sell any holdings in the next 72 hours

A new patent has emerged from Apple related to Oleophobic Coating, which has been widely used to protect Apple screens from oily fingerprint smudges since 2009. The patent has never been applied to sapphire screens until now so this development is another major milestone for Apple and GT Advanced towards the production of sapphire screen for Apple iDevices.

Appleinsider reported on the patent news this morning.

What is interesting is that this patent allows for the oleophobic coating to be applied to a brick of sapphire and not having to apply it to each cut screen individually i.e. the patent allows for batch processing. The process used to coat sapphire screens is different from traditional glass screens. The patent mentions PVD and sintering as options. Apple and GT may be leveraging GT’s SPS technology for sintering to get this job done in the most efficient way possible Spark Plasma Sintering (SPS)

Some highlights from the patent filing are below:

[0001] This application claims priority to and the benefit of U.S. Provisional Patent Application No. 61/704,275, filed Sep. 21, 2012 and titled “Oleophobic Coating on Sapphire,” the disclosure of which is hereby incorporated herein in its entirety.

TECHNICAL FIELD

[0002] The subject matter of this application relates generally to surface coatings on substrates. In particular, the application relates to oleophobic coatings and other surface coatings on substrates for uses as windows on electronic devices, including, but not limited to, mobile phones and portable computing devices.

BACKGROUND

[0003] Electronic devices may include a range of different touch-sensitive input surfaces, for example as incorporated into displays, track pads, keyboards, and combinations thereof. In use, however, oils and other deposits may affect appearance and performance, particularly where information is also displayed on the touch-sensitive surface (e.g., on a touch-sensitive display).

[0028] In general, the use of sapphire materials provides substrate 200 with substantially increased hardness, as compared to silica-based glass and other materials. For example, substantially single-crystal forms of sapphire glass may have a hardness of up to about 2000 points on the Vickers scale (about 19.6 GPa), or in a range of about 1800-2300 points on the Vickers scale (about 27.7-22.5 GPa). Alternatively, sintered polycrystalline forms of alumina or sapphire glass may have a Vickers hardness of about 1200-2000 points on the Vickers scale (about 11.8-19.6 GPa), depending on grain size, and fused amorphous forms may have a hardness of about 1000-1200 points on the Vickers scale (about 9.8-11.8 GPa).

[0024] Alternatively, base layer 202 may be formed of an amorphous aluminum oxide, transparent alumina or other sapphire-like material, for example by thin film deposition, sintering, vapor deposition, or other process. In these examples, base layer 202 may also include a combination of amorphous and polycrystalline components, in order provide a selected combination of transparency and hardness.

[0043] In the particular configuration of FIG. 3, deposition units 226 are provided in the form of physical or chemical vapor deposition (CVD or PVD) components. Alternatively, other processes and components may be utilized, for example to treat substrate 200 by sputtering, electron beam deposition or electron beam evaporation, or a combination of such processes.

Obscure Analyst returns next week with a vengeance!

Posted: March 27, 2014 by mattmargolis24 in Uncategorized
Tags: , , , ,

Below are some stories that you should expect to see when the Obscure Analyst returns to active duty over the weekend.

1) Corning exec’s and their continued denial regarding gorilla glass versus sapphire benefit debates.

2) A deep dive into why sapphire can offer a significant “performance” boost for electronic devices and this goes far below the sapphire cover. Does your electronic device ever freeze or get upset at you while performing some basic functions? The answer is yes and sapphire might be able to minimize this occurrence. I frankly refer to it as a pissing contest between the electronic device components that impact the overall performance of the device, but it has scientific name and scientific method to help the situation. I will dig into this “lesser known” scientific benefit of sapphire, which can boost the performance of the device and in turn increase battery life. Something every electronic device manufacturer is striving to improve.

3). I will highlight my discussions with a fellow tech nerd, who had a chance to speak to GT’s Dan Squiller over a year ago regarding GT sapphire screens. This tech nerd also has a business colleague that had a chance to play with the $10,000 Vertu sapphire screened phone and did some “testing” on the screen. The colleague was more concerned with being mugged than actually damaging the Vertu sapphire screen.

4) I will detail Apple’s planned production phases inside Mesa. Yes phases! Each section of the building is broken into 9 phases. Could each phase represent a different product? Or Just a different sized sapphire device (5.5″ versus 4.7″ iPhone)? Could each phase represent staggered launch dates for multiple products? The production phases certainly open up some new questions and possibly shed some light on the long term plan between Apple and GT.

Several other stories are in R&D include some at least one wild benefit of sapphire that could help Apple users see and use something that’s not “really” there. Lastly, if anyone has anything they want me to dig into feel free to email me at matt.margolis24@gmail.com and I will be more than happy to dig up something good for all to enjoy.

~Obscure Analyst 3/26/14

Blogger Jeffrey Clarke is eating up the GTAT monster. Clarke appears to have closely read my Seeking Alpha article focused on GTAT beyond Apple. He also took notice of my $64 minimum target for shares of GTAT, ” Matt Margolis expects at least $64 per share and I wouldn’t be surprised”. GTAT longs will be celebrating their own cold beverage on a sunny island together in a few years as their patience and vision get handsomely rewarded.

GT Advanced Technologies (GTAT) is one of the most interesting and most written about stocks out there right now. Matt Margolis, a contributor at Seeking Alpha, has become something of an internet sensation by publishing strong speculative evidence that Apple is using sapphire technology from GTAT to add solar charging functionality to the iPhone 6. That would be awesome for Apple and iPhone customers, but is only sort of interesting from the standpoint of investing in GTAT. Apple is going to buy a lot of sapphire from GTAT regardless of whether it has solar capability or not, and I think the value of that agreement with Apple is largely reflected in the current GTAT stock price of $18 per share. What’s more interesting about GTAT is everything else it has in its pipeline that the market seems to be not valuing at all.

To be fair, this isn’t a new or novel argument. Matt Margolis has published several articles on Seeking Alpha along similar lines and has concluded that the stock is worth $64 to $85 per share. He goes into a lot of detail and gets distracted by the solar angle, though. So a lot of my below conclusions borrow from his conclusions, but I’ll summarize, bring in other sources and add my own finance-driven perspective.

Matt Margolis has estimated that revenue from the Apple agreement will be approximately $2.2B in 2016. He is equal parts aggressive and conservative, and in total the estimate looks reasonable to me.

I’m not going to do the math to estimate a per share value, but potential upside of $3.0B per year on a company with 30% margins is a great option to be buying for free. The ride might be a little bit rocky this year because GTAT isn’t expecting to return to profitability until Q3 or Q4 of this year, but if they execute on the Apple agreement and start building an order book in any of the above incremental technologies, that rocky ride will transition to simply rocking, on the upside. Matt Margolis expects at least $64 per share and I wouldn’t be surprised.

A link to Clarke’s GTAT roundup can be found on the link below.

http://caps.fool.com/Blogs/gtat-ready-to-rock/949419

Full Disclosure I am long GTAT and have no plans to buy or sell any holdings in the next 72 hours.

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Apple’s Killer Sapphire Slicing Lasers – by Matt Margolis

Nearly two month’s ago Apple’s sapphire window patent came to light and I know I focused my attention on the sapphire screen and thought to myself, “yup, they perfected the sapphire screen (window) no surprise.”  What I just realized today as did many others is that Apple might be using a laser to slice sapphire instead of the traditional diamond wire saws.  So what?  Laser cut sapphire screens would cost significantly less, the screens could be made faster and the yield per sapphire boule because of near elimination of kerf lost would also increase significantly.  It sounds like one of those “win win” situations.  The cost per screen would decrease dramatically since 50% of the cost of a completed sapphire screen (as of 2013) was split between the cost to grow the sapphire and the processing costs to transform a sapphire boule into a sapphire screen.  I know GT has improved the ASF furnace size as well as improved their boule quality through the use of their Intego Sirius Sapphire Display Testing Tool (image below).  Additionally, based on my discussion with a well-respected sapphire industry expert, Apple has been “squeezing” the raw material suppliers to reduce the material costs significantly.

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I think it’s important to to revisit the sapphire window patent and then introduce the new laser cutting technique since they are very closely related.  The sapphire window patent was developed, because glass is glass and sapphire is sapphire and “despite all the processing, the glass remains susceptible to damage and scratches, chips and cracks in the glass diminish the ability of the device to perform its intended purposes“.  I’m wondering why Corning doesn’t include that in their press releases and specs related to Gorilla Glass?  I mean, it is true right?  Below is the background issue related to current glass displays and the sapphire display summary.

BACKGROUND

[0002] Mobile electronic devices are ubiquitous in today’s society. From cell phones to tablet computers, they can be found in pockets, purses, and briefcases, and are used in both personal and business settings. Generally, the devices include a visual display output. In some cases, display may perform double-duty by providing the visual output and receiving touch input. Often, these devices also include cameras and other input devices. Both the display screens and camera covers are typically made of glass.

[0003] In processing the glass for use as a camera cover or a display screen, a large sheet of glass is initially cut into squares by a scribe and break process before each of the cut squares are ground into a desired shape. Chamfers may be added to the individual glass pieces and a chemical strengthening process may be performed to help fortify the glass pieces. Subsequently, each individual glass piece is lapped, polished and decorated to finally produce the glass cover or screen. The process is lengthy and includes many steps, most of which are performed on an individual basis rather than in a batch. Despite all the processing, the glass remains susceptible to damage and scratches, chips and cracks in the glass diminish the ability of the device to perform its intended purposes.

SUMMARY

[0004] One embodiment may take the form of a method of manufacturing sapphire windows. The method includes obtaining a polished sapphire wafer and applying decoration to the sapphire wafer. The method also includes cutting the sapphire wafer into discrete windows. In some embodiments, the cutting step comprises laser ablation of the sapphire.

[0005] Another embodiment may take the form of a method of manufacturing sapphire windows that includes growing a sapphire boule, coring the sapphire boule to form a sapphire core and slicing the sapphire core into wafers. Additionally, the method includes lapping the sapphire wafers, polishing the sapphire wafers for provide polished sapphire wafers and dicing the sapphire wafer into discrete windows using a laser. The method also includes applying an ink mask to the discrete windows.

As you can see, one of the ways suggested ways to cut sapphire includes dicing the sapphire wafer into discrete windows using a laser.  This method would provide significant cost reductions and improve yield because kerf loss (think saw dust) would be substantially minimized.   The laser cutting technique could significantly lower the cost of sapphire screens and the potential premium that Apple would be paying for sapphire screens over reinforced glass.  I was thinking of Hyperion 4 but the power requirement below suggests a power of 50 watts, while Hyperion 4 uses 100 kilowatts which is equivalent to 100,000 watts.  This would be like me hitting my driver off the tee-box on a 132 yd par 3, just a little bit too much club for such a short yardage hole.   Maybe Apple is going to be using some Austin Powers’ laser beams to cut their sapphire screens or to make the iWatch screen?  According to Bloomberg Apple was going to spend $10.5B in 2014 on robots to lasers to shore up the supply chain.  Perhaps not as cool as Austin’s sharks with laser beams attached to their heads but Apple is definitely cutting edge.

The detailed description of the sapphire window patent is below:

DETAILED DESCRIPTION

[0023] Conventionally, sapphire has not been a viable alternative for glass or plastic surfaces of electronic devices. This is due in part to the cost of obtaining and difficulty of processing the sapphire. In particular, sapphire is relatively rare and expensive. Additionally, due to the hardness of the sapphire, conventional processes may not be effective or may result in faster wearing of tools and significantly increased processing times. Methods for creating sapphire windows are described herein that achieve processing efficiencies to, in part, make the replacement of glass or plastic members of electronic devices feasible, whereas previously such replacement would be at least cost prohibitive. Generally, the sapphire window may be C-plane sapphire, although other orientations may be implemented as well. The C-plane is typically more available commercially and provides a good level of hardness.

[0024] One embodiment may take the form of a method that includes cutting through the sapphire using a laser. That is, the laser may have sufficient power to cut through the sapphire. To this point, commercially available lasers have not been able to perform this task with sufficient efficiency, primarily due to insufficient power. Specifically, the laser may be capable of operating at or near 50 Watts, although some embodiments may utilize higher or lower power lasers. Additionally, in some embodiments, the laser power may be dynamically adjusted to suit a particular purpose. Moreover, the laser may operate in or near the IR band of the electromagnetic spectrum and may be capable of pulsing in or near the pico second time frame. In other embodiments, the laser may operate with pulse lengths from the millisecond to the femtosecond range. The use of the laser provides for a faster cut over conventional techniques, such as CNC grinding used for glass but that still yields a sufficiently clean edge. Further, the laser is able to cut with precision so that a single wafer of sapphire may yield more similar sized windows than a glass wafer that is cut using conventional techniques.

Apple’s new patent ‘Multi-Step Cutting Process‘ that emerged today.

SUMMARY

[0004] Methods related to efficient processing of sapphire are discussed which are expected to both speed manufacture of corundum for applications and make the use of conundrum cost effective. In particular, one embodiment may take the form of a method of cutting a hard transparent material having a polished surface. The method includes roughening a portion of the polished surface, directing a laser beam on the roughened portion of the surface to melt and, thereby, cut through the hard material.

[0005] Another embodiment may take the form of a system for processing corundum including a roughening apparatus and a laser. The roughening apparatus initially receives a corundum member and roughens a polished surface of the corundum member. The laser then cuts through the corundum member by directing the laser at the portions of the polished surface that have been roughened.

[0006] Yet another embodiment may take the form of a method for cutting polished corundum including a surface preparation step and a cutting step. In the surface preparation step, a polished portion of the surface of the corundum is prepared for subsequent cutting through in-coupling of laser energy. In the cutting step, a laser is directed to the portion of the polished surface of the corundum that has been prepared.

Below are a few images from the patent.  One looks like a golf ball, or a cookie cutouts but it’s actually a very top surface of a boule or wafer that has had “holes” sliced from it.  The first thing I thought of is these little “cutout rings” would be perfect for the iWatch.   It’s still anyone’s guess exactly what is happening inside Mesa, but this new “killer laser” patent does shed some light on how Apple and GT Advanced Technologies never stop finding ways to reduce costs and make the sapphire screen process more efficient.  Deploying lasers to cut sapphire screens would significant  reduce the time consuming process of slicing them with diamond wire saw and it would significantly increase number of screens per sapphire boule.  The elimination of diamond wire saw cutting would increase the useable % of the sapphire boule, reduce costs, increase the amount of screens and allow Apple and GT to be more agile to respond relatively quickly to consumer behavior and trends.

Screenshot - 3_20_2014 , 10_43_23 PM Screenshot - 3_20_2014 , 10_44_46 PM

Full Disclosure: I am long GTAT  and have no plans to buy or sell in the next 72 hours

 

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Pegatron Reportedly Starting iPhone 6 Production in Q2 – So What? – by Matt Margolis

Latest reports surfacing everywhere including 9to5mac are suggesting that Pegatron (one of Apple’s 2 main manufacturers, Foxconn the other) is set to begin mass production of the device in Q2 2014.  The link to the Chinese new site is here, but last time I checked I barely made it through my mandatory language course requirement (Spanish) in college, so translating this one for accuracy is out of the question.

In comparison the production ramp up of Apple’s iPhone occurred around August 1, 2013 ahead of a September 10th debut.  Last year, Apple had significant yield issues with certain components and the availability of it’s iPhone 5s and iPhone 5c, was far from Apple-licious to say the least.

So what does a Q2 build ramp up do for release date and GT sapphire sales?

Well first off, Apple has diversified it’s manufacturing strategy by bringing in Pegatron to assist Foxconn with the assembly of the upcoming iPhone(s).  Last year, Apple’s manufacturers ramped up production approximately 45 days before product release.  It is has been widely speculated that the iPhone 6 may represent the biggest iPhone launch in Apple’s history.  One reason for the mega release, is that millions of people (including myself) skipped upgrading my iPhone 4s for the iPhone 5s, because it just wasn’t worth it.  The other major reason is because of the larger phone sizes that are widely anticipated.  I expect some fans of Samsung’s large devices to head over to Apple to enjoy their larger, sexy, new line of iPhones (no Justin Timerblake reference intended).

I’m going to assume Apple’s manufacturing partners only need 45 days to assemble enough devices ahead of the iPhone release.  I’m also going to follow the lead of Eric Virey from Yole Développement and assume that GT will sell sapphire bricks to one of Apple’s manufacturing facilities for slicing, polishing and finishing of the sapphire screens. I will assume that the process will take approximately 30 days for the dedicated plant to take sapphire bricks and convert them into sapphire phone screens.  So what does the data tell me?

Image

Based on the Q2 ramp up it looks like GT will need to sends sapphire bricks over beginning in March, April or May in order to allow for Pegatron to begin their assembly ramp up of the device by 4/1, 5/1 or 6/1.  What is even more interesting is a Q2 manufacturing ramp up would target the iPhone 6 release date between 5/16 and 7/16, if you split the difference the date is 6/15.  The 6/15 date is even more interesting, because Apple’s 2014 WWDC is already scheduled for June 10 to June 14.  Planning the release during the WWDC would certainly create some buzz and fanfare for Apple.  A June release would mark the first iPhone release since 2007 and if the iPhone 6 is going to be epic, I say why not? Go for it Apple! If you are wondering, a June iPhone would release would add approximately 30-40m more sapphire unit sales to my current 2014 estimates.

I know what you are thinking, how is it even possible GT could be ready by 3/1, 4/1 or 5/1 to ship sapphire bricks to Apple facility for processing to create sapphire screens.  The secret answer might come from what GT was doing back in September 2013, from their Salem, MA crystal growth facility.  Myself and others who follow the company closely, noticed GT was hiring 2nd and 3rd shift workers for their sapphire crystal area.  The Apple deal was still a few months away at that time and GT was forecasting to hit their 2013 year end revenue and earnings numbers.  As it turned out, 45 days later GT announced the sapphire deal with Apple and they proceeded to bomb their Q3 and Q4 revenue and earnings’ forecasts.  Overall in total, GT missed their 2013 revenue forecast by almost 50%.  So why did GT hire all those 2nd and 3rd shift workers if they didn’t generate any revenue for the business in Q4 2013?

I believe GT has been making sapphire boules using Apple’s form factor since last summer or even earlier from their Salem, MA facilty.  I also believe GT has been readying the deployment of their capital equipment needed for Mesa almost a year in advance.  The secret to GT meeting Apple’s sapphire screen needs by June 2014 could be boosted by the fact that GT has been prepping and readying for Apple’s iPhone 6 launch for the last 2 years.  GT’s CEO Tom Gutierrez, as back as far as May 2012 was already publicly commenting on what would need to be done to cover Apple’s phones in pure sapphire.

TG May 2012 Q1 CC

But if we’re working with one of the majors that is going to drive millions of phones, then we are probably talking anywhere from 6 to 12 months to build the supply chain to do it.

November 2012, TG speaks about producing a thinner sapphire wafer, which would yield cost savings and produce more screens per sapphire brick.  He also stresses the advantage of a sapphire brick and the fact that it; requires fewer fabrication steps for cover screens, lower surface finishing requirements and allows for much faster grinding and polishing with fewer material loss (much high screen yield per boule than previous methods).  GT also brought up the optimization (optimized boule size, cycle time and lower material cost) of their ASF furnaces. The ASF furnace advancements were completed in Q4 2013, ahead of the Mesa sapphire plant ramp up.  Also in November 2012, TG informed investors that GT would start laying down assets in the second half of 2013 and that a high volume phone with sapphire likely wouldn’t be seen until 2014.  GT deployed $180M of PPE in Q4 2013 and now Apple is widely expected to release high volume phones with sapphire screens on them in 2014.  Some of TG’s comments from November 2012 are below and I believe his responses give investors answers to a lot of the questions being raised today that can’t be answered by TG!

TG November 2012 Q3 CC

To the extent that a thinner sapphire wafer is possible, which is likely, given sapphire’s superior strength, this cost differential will be at least 30%. This does not reflect the other significant cost reductions that we believe can be achieved as we further optimize the ASF growth process for this application through adjustments, such as optimized boule size, shorter cycle times and lower cost consumables.

With regard to fabrication, we estimate that the cost to fabricate sapphire from a brick to a screen is at least 40% less expensive than from a core to an LED wafer. This results largely from the fewer fabrication steps required for cover screen processing, as well as the lower surface finishing requirements, which allow for much faster grinding and polishing, as well as less material loss.

And finally, several new technologies are being brought to market that will further drive cost reductions and optimizations. One such example is Meyer Burger’s recently introduced bricking wire saw, which is expected to make the harvesting of bricks from a sapphire boule economically feasible and significantly less expensive than the current rotary blade saw processes in use.

We’ll start laying down assets second half of next year, but you won’t see a high-volume phone with sapphire on it, I don’t think, until 2014 ($180m PPE Deployed in Q4 2013?)

It’s amazing what you can learn by looking at the past and then realizing where you are in the present and where you will be in the future.

My review of the past indicates that we have not arrived at the future. The present is a lot grander than anyone can understand today.

In the future we will learn what we missed from the past. We will learn that clues from the past were absolutely a sign of things to come.

~The Obscure Analyst 2/28/14

Full Disclosure: I am long GTAT and have no plans to buy or sell any holdings in the next 72 hours.

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Analyst Reaction to 3/14/14 Technology Conference

Goldman Reiterates Buy Rating:  GTAT affirmed its EPS goal of over $1.50 by 2016, though Goldman sees the estimate is conservative given the $4 to $5 billion market opportunity that awaits before factoring in its Apple.   GTAT could see large upside from Hyperion.  The analyst doesn’t see sapphire lamina being included in the upcoming Apple iPhone 6.

UBS Ups PT to $22: UBS sees GTAT new product sales offsetting some sales exposure to Apple, which will be a long-term positive for the company. HiCZ furnaces making mono-crystalline solar wafers (estimate $1bn market by 2017).We estimate equipment gross margin to be in a range of 35-40% and materials gross margin to be in 25-30% range. We expect Hyperion for sapphire and Merlin for solar to be the most meaningful contributors to GT’s sales in 2016 with initial orders expected in 2H14 UBS concluded.

Canaccord Reiterates $21 PT: “We reiterate our buy rating on GTAT shares as we believe the Apple opportunity plus the recovery in the solar market should allow the company to exceed Street expectations,” Canaccord analysts Jonathan Dorsheimer and Josh Baribeau wrote in a Monday research note. “Additionally, GT has an increasing number of ‘irons in the fire,’ which reduces diversification and customer concentration risks.”

Credit Suisse Ups PT to $26: Takes 14’/15’16’ EPS estimates from $0.13/$1.38/$2.12 to $0.14/$1.49/$3.00.  Takes 14’/15’16’ Revenue estimates from $717m/1,559m/2,123m to $728m/$1,643m/$2,747m.  “the other businesses in polysilicon equipment, ingot equipment, sapphire equipment, and new products like Hyperion for thin laminates and Merlin for cell grids deserve more credit in the valuation and will likely lead to higher consensus estimates, especially as orders resurge in late 2014 and early 2015”.

Obscure Analyst Ups Target: $75-100: “2015 and 2016 estimates have not changed significantly from what I had before the 3/14 Technology Conference.  My margin has improved based on comments from TG regarding Hyperion and that it would carry “superior margins” to GT’s historic rates because no one else has a product like it in the marketplace.

Updated Revenue & EPS: 2015 $3.177 B – $2.84 EPS, 2016 $4.736 – $5.26 EPS

Previous Revenue & EPS: 2015 $3.177B – $2.74 EPS and 2016 $4.416B – $4.26 EPS.

Apple Upgrade Cycle Making News
 
Forbes: Is reporting that the “Mother lode” of Apple upgrade cycles is coming in 2014.  Citing ISI analyst Brian Marshall is predicting Apple will release 2 phones 4.7″ and a 5.5″ model.
 
We estimate the current iPhone installed base to be about 260mil users (roughly equivalent to the last 7 quarters worth of iPhone units). By our calculations, we estimate slightly over half of iPhone sales today go to upgrades (with the majority of new users coming from international markets). However, we believe that while the upgrade rate (i.e., % of installed base upgrading their device in a given quarter) had hovered in the 10-11% range over 2011-12, it has now dropped closer to 9% as users find few compelling reasons to upgrade. In peak quarters, the upgrade rate has reached the ~12-14% range and we expect a similar upgrade rate in 2H14 for iPhone 6, if not better. We believe this could drive ~$3.00 (or ~10-15%) EPS accretion over 2H14 assuming an incremental ~3% of the base upgrades each quarter.
GT’s Magical Merlin Technology
Mark Osborne (PV Tech): Covers GTAT’s Merlin Technology, the game changing addition to the solar market.
“We are very excited about the progress we are making in developing what we believe will be a true game-changing technology to lower the cost of solar modules,” said Tom Gutierrez, GT’s president and CEO. “Our Merlin technology uses mature, proven manufacturing processes to produce the flexible grids and we are confident that we can scale grid production to meet the requirements of the solar industry. Our Merlin technology is expected to fundamentally change the way modules will be manufactured, shipped and installed in the future.”
 
TG on CNBC with the Fast Money TeamOf course the first question was about Apple from the Fast Money team was about Apple.  TG went right into answering it by focusing on the creation of US jobs and the fact it is a sapphire manufacturing facility under a 1.4m square feet under roof.  TG indicated that GT has received 2 of 4 prepayments so far from Apple and things are going well.  When asked about it will be up and running to full capacity, TG stated, “As you can imagine in that industry surprise is a very important element in introducing products.”  TG also stated, that “the unique nature of what we are doing for Apple, we are the probably only ones in the world who can pull this off”.  He also said GT is not just about Apple, We introduced products (on Friday) that should drive 3-5b of incremental market opportunity over the next 3 to 5 years that are all equipment products”. 
 

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Hyperion is not part of GTAT’s Exclusivity with Apple – Now What? – by Matt Margolis

I’ve been seeing some recent chatter regarding comments TG made during the technology conference on held on 3/14/14.  TG indicated that Mesa, AZ was an Apple plant and that “Hyperion was not part of our exclusivity with Apple”.  So what does this mean?  In order to answer this question and chatter I always look to the past for specific comments made from TG to help understand his recent message.  For this one I turned back the clock to the Q4 2012 conference call.

Q4 2012 Conference Call TG Comments

We believe that current sapphire fabrication techniques, excluding Hyperion, will support the adoption of sapphire in several applications including smartphones and point-of-sale systems.

(Sapphire Laminates are) a broader application than what we would not consider to be the true smartphone area, where a pure sapphire solution is more likely, okay?

The comments from TG above definitely indicate that pure sapphire cover screens will support adoption for smartphones.  Apple wants sapphire for more than just the scratch proof strength and they will not settle for anything less than pure sapphire.  Also, if you take a look at Apple’s sapphire patents, it is quite clear that Apple has much bigger plans with pure sapphire versus just adding sapphire laminates to their devices.

Sapphire Laminate Marketplace

Since Apple does not appear to limit GT’s application of sapphire laminates layered on poly carbonate or glass substrates, the question is what market’s will they go after with this new technology?  One answer looks like the broader mobile phone market and tablet market place.  They could also supply Hyperion tools to an aftermarket player that wants to supply sapphire laminates for mobile or tablet marketplaces.  Other potential targets for sapphire laminates include navigation systems, music players, point-of-sale and touchscreen markets.  I came across a research report last week from Barclays who covers TPK.  The Barclays report gave confidence that TPK’s TOL (Touch on Lens) business related to sapphire laminates was anticipated to grow.  The report also indicated Apple was likely to introduce an iPad with sapphire laminates at some point down the road.  Needless to say there seems to be a lot of buzz in the sapphire laminate market outside of Apple’s pure sapphire solution.  Below are TG’s comments from Q4 2012 related to the potential sapphire laminate marketplace.

Q4 2012 Conference Call TG Comments

We also believe that there could be an incremental future market opportunity using Hyperion to create lower-cost sapphire laminates for broader mobile phone and aftermarket applications.

The objective (is)  to build another end to the business other than the high-end smartphone, the broader smartphone part of the marketplace.

Sapphire laminates are expected to have some, but not all, of the attributes of a pure sapphire solution and are expected to have a cost structure that rivals current cover glass products on the market today.

It’s really expanding into the lower part of the market that wouldn’t normally consider using a sapphire (solution) because the technique that we’re developing would get you a sapphire surface on a polycarbonate or glass substrate.

An aftermarket, if you think of the laminates and the substrate that are out in the marketplace that you put on your phone on an after-market basis to protect it, there’s a potential for creating an after-market laminate business here as well.

To make it clear, we’re not going to make laminates. We make Hyperion cleaving tools that we will sell to people that let them do that.

Full Disclosure I am long GTAT and have no plans to buy and sell any holdings in the next 72 hours

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