· UBS checks indicate that GT shipped some small quantities of sapphire made in its Arizona fab to one of Apple’s partners in China who is in charge of making sapphire covers.
· Given the early success of starting shipments of small amounts of sapphire to China last month, UBS expects GT could raise its full year 2014 sales guidance to the upper end of its $600M-$800M range, with 80%+ still likely from sales of sapphire materials.
· UBS expects 4th and final prepayment will be made in May
· UBS is estimating 100 furnaces were turned on and running. They expect 400-500 sapphire furnaces to be turned on in 1Q14 and 900-1000 in 2Q14
· Sapphire cover screens margins expected to be around 25%
If you follow the Obscure Analyst, you would already know GT turned on 140 furnaces on January 10th, 2014 and UBS checks indicate that the “Quick Start 140” furnaces made their first delivery of sapphire ingot in to one of Apple’s partners in China who will make the sapphire covers. A sapphire ingot is a sapphire that is “cored” out of the boule that will need to be sliced into sapphire screens. UBS indicated that 2,200 kg of sapphire ingots were shipped to China for processing. I am estimating that approximately 100,000 to 115,000 sapphire screens could be produced from 2,200 kg of sapphire ingots. GT’s selling price per screen based on the information provided is falling into the range of $8.50 to $10 per screen.
I am slightly more optimistic than UBS as far as the sapphire furnace ramp up due to the fact that over 1,200 furnaces have been imported and delivered prior to the Mesa, AZ plant prior to March 3rd, 2014. Additionally, my 1,200 furnace count does not include any furnaces from GT that were taken out of equipment inventory in Q4 ($71m worth), or $180m worth of PP&E that was deployed in Q4 2013 (mostly in AZ). I believe that nearly all of the furnaces were ramped up by the end of March based on GT’s ability to ramp over 500 furnaces a month and given that fact that most of the furnaces were delivered between December and February.
Full Disclosure: I am long GTAT and have no plans to buy or sell any holdings