Archive for the ‘Apple Investor Information’ Category

Barron’s released some information from Brian White of Cantor Fitzgerald.

White was most recently in the news regarding his belief that sapphire was seen in some iWatch models and that the iPhone 6 would feature sapphire glass.

White’s supply chain check indicates, “that initial production of certain “iWatch” components is scheduled to begin later this month and there are plans for a sharp acceleration into fall.” The report also indicated that the iWatch will likely arrive along side the iPhone 6 in September. White estimates the iWatch will be priced between $199-$299 for entry level device.

White believes the first iteration of the iWatch is more of a companion device.

Since our research suggests the first iteration of the “iWatch” is more of a companion device, and thus requires a connection to an iPhone, we believe unveiling the two new devices at the same time makes sense.

White also indicated that the 5.5 inch iPhone 6 is likely to arrive this fall.

Furthermore, as we make our way through Computex, our research is uncovering more evidence that the 5.5-inch iPhone 6 will launch this fall.

Related Stories:

iWatch Touch Panel Provider TPK Almost Guarantees iWatch will Feature Sapphire

Full Disclosure: I am long GTAT

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As the Obscure Analyst I always dig up information.  Tonight while checking out the latest news and coverage on tomorrow’s WWDC I stumbled across a very interesting post from TK Tech News.  TK Tech News is reporting that Apple will reveal the iPhone 6 tomorrow during Monday’s WWDC due to a large number of iPhone 6 devices that have gone missing and a reported rogue demo of the iPhone 6 that could be released at any time.  The video commentary related to the iPhone 6 release at tomorrow’s WWDC can be found here

 

Reported by TK Tech News: Well Well Well, Looks like Apple is going to announce the iPhone 6 at WWDC alongside the iWatch, This may be because Apple recently had a problem in one of their Foxconn plants in China. Reportedly some 40 actual devices were lost, leaked, sold, who knows, But it looks like Apple is trying to get out in front of the leaks and release the phone much earlier then they intended, Guess they dont want to be the next samsung which we saw pretty much everything they wanted to release on June 12th get leaked this week. Will apple beat the leakers and announce the device before a hands on video can be shown, It will be interesting to find out.

 

I went through the website and found out that TK Tech News has recently leaked several new smartphone hardware devices prior to the official manufacturer announcements.  TK Tech News published a demo video of the Samsung Galaxy S5 Active on May 23rd that was filmed on May 20th.  The actual Samsung Galaxy S5 Active was announced by Samsung on May 29th.

 

 

Disclosure:  I have no idea if the claims made by TK Tech News are valid.  In the spirit of sharing information I felt it was my responsibility to share the post and video for others to decide for themselves. 

 

 

Full Disclosure: I have no position in AAPL but I am long Apple’s newest sapphire supplier GTAT.

Reminder: My PTT Research Forensics Newsletter that is scheduled to be published on Thursday June 5th at 3pm EST.

My Forensics Newsletter pricing is now available and a special 20% launch discount (for the first 48 hours) will be available when my Forensics Newsletter subscription goes on sale on Monday June 2nd at 12pm EST.

If you were wondering what my next pick will be. Here is my sneak peek summary:

My next pick is a company that is built on top of a strong foundation of intellectual property. My analysis of the company’s data and public comments indicate that a “major ramp” in future sales is just getting underway. The company’s C-suite is in the process of scaling up the business and preparing to manage a much larger and more complex company. The company has quietly created an integrated eco-system comprised of software and hardware that continues to extend its competitive edge over its largest competitors. The industry that the company primarily supports is in the early stages of what is expected to be an explosive and long-term growth cycle.

Apple’s keynote WWDC delivery from CEO Tim Cook is just over 24 hours away. The iPhone 6 is still likely a month or more away from making it’s well anticipated arrival. Foxconn is expected to begin assembling the iPhone 6 in July, which means the earliest the device may arrive in customer hands is July at this point.

Apple has made some waves recently regarding the company’s pipeline of products. Apple VP Eddie Cue recently said that, “later this year, we’ve got the best product pipeline that I’ve seen in my 25 years at Apple”. The center of Apple’s product pipeline is Apple’s iPhone 6, which boasted sales of over 150m units in 2013. However, Apple iPhone sales in 2013 failed to keep up with the smartphone industry growth rate. IDC reported that in 2013, “Apple had the lowest year-on-year increase of all the leading vendors,” yes even LG had a larger year-on-year increase than Apple!

Although, Apple’s iPhone 6 may not be ready for distribution until July at the earliest I believe 2014 is the year Apple needs to show off the device whether or not it will be ready for sale in just 2 weeks. Apple historically introduces its next generation iPhone and then follows it up with a product launch within 2 weeks.

Apple’s smartphone market share is well under 20% and even though introducing a new iPhone 6 a month or more ahead of it’s expected sale date may hurt Apple sales, it’s the right thing to do. If Apple wants to gain additional market share they need to demonstrate that the company’s iPhone 6 is awesome enough for Samsung loyalists to switch over to Apple. Samsung just officially announced the Galaxy S5 Active on Thursday with mobile carrier AT&T. LG just announced its latest LG G3 smartphone, which will be launching in various countries over the next several weeks.

Conclusion

The best way for Apple to rain on Samsung and LG’s smartphone sales parade is by showcasing the iPhone 6 on Monday during the WWDC. If Apple’s 2014 product pipeline is truly the “best pipeline the company has had over the last 25 years,” then it is time for Apple put up or shut up on Monday. If Apple’s upcoming iPhone 6 is “truly epic” it should create a the perfect storm to rain on Samsung and LG’s product launch sales parade even if the iPhone 6 won’t show up in consumer hands for another month or more.

Apple can win significant smartphone market share right now by forcing consumers to rethink what is cool and what is innovative in the smartphone marketplace. If Apple delivers an “epic” iPhone 6 product during Monday’s WWDC, it may hurt iPhone 5s/5c sales, but at the same time it would deliver a tremendous amount of damage to the other 80% of the smartphone handset marketplace.

A preemptive strike by Apple on Monday during the WWDC would be more rewarding for Apple in the long term versus being predictable and announcing the iPhone 6 just weeks before the product launches, which is consistent with every previous iPhone launch cycle. Apple needs to disrupt consumer behavior and force the remaining 80%+ of smartphone consumers to delay their smartphone purchases and wait for Apple’s iPhone 6 device to go on sale. The only way to disrupt consumer behavior and significantly increase smartphone market share is by way of an “epic” iPhone 6 announcement during tomorrow’s WWDC keynote speech scheduled for 1pm EST.

Full Disclosure: I have no position in AAPL but I am long Apple’s newest sapphire supplier GTAT.

Reminder: My PTT Research Forensics Newsletter that is scheduled to be published on Thursday June 5th at 3pm EST.

My Forensics Newsletter pricing is now available and a special 20% launch discount (for the first 48 hours) will be available when my Forensics Newsletter subscription goes on sale on Monday June 2nd at 12pm EST.

If you were wondering what my next pick will be. Here is my sneak peek summary:

My next pick is a company that is built on top of a strong foundation of intellectual property. My analysis of the company’s data and public comments indicate that a “major ramp” in future sales is just getting underway. The company’s C-suite is in the process of scaling up the business and preparing to manage a much larger and more complex company. The company has quietly created an integrated eco-system comprised of software and hardware that continues to extend its competitive edge over its largest competitors. The industry that the company primarily supports is in the early stages of what is expected to be an explosive and long-term growth cycle.

 

 

Update: Video proven likely to be a clever prank. The good news is less than 48 hours until the opening up the WWDC14 to find out what is really on tap from Apple.

Apple’s WWDC is set to kickoff on Monday June 2nd at 1pm EST and nowhereelse.fr just published a video that captures what appears to be a practice run of the WWDC14 slide show inside the Moscone Center in San Francisco.  I grabbed the 3 images that were available from the slide show video presentation and it certainly looks like the iPhone 6.

 

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The rear of the device from the slide show video looks nearly identical to images of the rear shell that were released from http://www.macfixit.com.au just 2 days ago.

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Monday’s WWDC may just be a bit more exciting than most people thought if Apple is going to surprise nearly everyone with the release of the iPhone 6.

 

 

 

 

 

 

by Matt Margolis

 

The release date of Apple’s next generation iPhone 6 is a mystery and each analyst and blogger has their own opinion of when it’s coming out.  I found one interesting rumor related to the iPhone 6 launch date that goes back to February 2013.   I found it interesting that the iPhone rumors began over a year before the product is set to arrive.  It also seems apparent that Apple’s 5s/5c launch were just table setters for what is likely to be a blowout product.  Apple appears set to launch a 4.7″ along side a 5.5″ iPhone 6 sometime between June 2014 and September 2014 and right now I’m leaning towards the earlier of the two dates.

The oldest iPhone 6 release date rumor I could find was based on a research report issued to clients by Jefferies analyst, Peter Misek in February 2013.  According to Appleinsider, analyst Misek believes Apple made an unsuccessful attempt to bump up the iPhone 6 launch into the back half of 2013 amid increased competition.

We believe a summer CY14 launch was originally planned, but Apple tried to accelerate it to stem its market share losses. The earliest Apple could have launched a 4.8” phone would have been this fall (with a target of Oct); however, our checks indicate that Apple’s suppliers are running into difficulties trying to scale the screen size from 4” to 4.8”.

Misek said scaling the in-cell screens from 4″ to 4.8″ has resulted in poor yields — meaning a significant number of display components from each batch being manufactured are not passing the company’s quality assurance tests. As such, Apple is unlikely to be able to manufacture enough of the larger 4.8″ displays to facilitate a full-blown launch of the handset until next spring.

In October 2013, Cantor Fitzgerald analyst Brian White indicated that a new big screen iPhone would arrive in 2014 as early as Q2 2014.

“Our meeting with a tech supply chain vendor highlighted a bigger iPhone is in the works, and our contact expects a launch in the 2Q:14/3Q:14 time frame,” White said in an investors note released on Thursday. “Nearly a year ago, our research in Asia uncovered early stage work on a larger iPhone, and we indicated in our Apple initiation report dated 9/4/13 that ‘a larger screen size on the iPhone is possible in 2014 that could approach 5 inches.’ Given today’s meeting, we are confident that a larger iPhone (approximately five inches) will become a reality in 2014.”

In November 2013, Susquehanna International Group Analyst Chris Caso shared the same opinion as Misek, specifically that the iPhone 6 would arrive in June, some three months ahead of the 5s/5c launch.  Caso also indicated that Apple might increase the price due to the bigger screen display that will be packed in the iPhone 6.

Caso also predicted that iPhone 6 may be more expensive than the current iPhone 5S. The company may start increasing the prices of its devices next year instead of lowering it as it will put new technologies to be further ahead in the market. The analyst said the increase in price is due to the bigger screen display that will be packed in the iPhone 6. Thus, iPhone 6 price may start from more than $199.

Rumors claimed aside from a larger screen, iPhone 6 will have a sturdier display with the aid of Sapphire glass, which was used to cover iPhone 5S’ TouchID fingerprint sensor. The Sapphire glass is claimed to be twice stronger than Gorilla glass by Corning used in most Android smartphones. Also, iPhone 6 may come with wireless charging feature just like the Google Nexus 5 but with the use of solar panels.

In February 2014, International Business Times (IBT) cited analyst Sun Changxu, who felt a June launch of the iPhone 6 along with a WWDC announcement seemed likely.

Chinese Web site QQ Tech reported an analysis from analyst Sun Changxu. According to the report, the analyst predicts Apple’s production to start soon as May. It is likely that Apple will introduce iPhone 6 during the WWDC.

Recent reports claimed Apple may release the iPhone 6 around June 20.  Reported features include sapphire screen, new mobile payment and a possibility of solar charging

The report also noted features such as a 4.7-inch screen and 1136 x 640 pixel display. Part of the prediction is a 5.7-inch phablet to follow the smartphone.

iPhone 6 June Launch date Fact Check Followup

  • Analyst Chris Caso indicated in November 2013 that Apple would not only release the iPhone 6 in June but also raise the price of the phone.  Followup: In April analyst Peter Misek reported that Apple has been working with carriers to charge and additional $100 for the iPhone 6.
  • Analyst Sun Changxu back in February indicated that Apple’s iPhone 6 production would start as soon as May and would likely introduce the iPhone 6 during the WWDC.  Followup: Various component makers have ramped up production beginning in Q2.  Additionally, iPhone 6 manufacturer Pegatron embarked on hiring spree in March and is expected to ramp up production of the iPhone 6 in Q2.
  • Nearly 3 weeks ago I reviewed Apple’s supply chain management and I noted that all of the activity occurring within Apple’s iPhone 6 supply chain are 3 months ahead of last year’s pace.   The accelerated supply chain activity included; significant price reductions of Apple’s current flagship phone (5s) occurring in March 2014 versus June 2013, component makers ramping production in April/May 2014 versus July/Aug 2013, leaked images of the iPhone 6 are surfacing months earlier  and one of Apple’s iPhone 6 manufacturing partners began hiring months earlier in the year compared to the hiring activity that occurred in 2013 just months before the iPhone 5s/5c launched in September.

Analysts have been forecasting the iPhone 6 to arrive in June for quite some time.  The flurry of recent news and leaks i.e.  (production activities, price cuts, manufacturing activity, leaked images, Apple/Carrier price increase discussions and Apple trade-in program) all are signalling an imminent arrival of the iPhone 6.  Apple’s 2014 WWDC  is just 3 weeks away and it might just be the perfect stage for Tim Cook and company to shock most, but not all of the analysts with an iPhone 6 product launch announcement.

 

Full Disclosure: I am long GTAT, Apple’s newest sapphire supplier

 

 

by Matt Margolis

Apple is currently recruiting for an  iOS Blue IOT (Internet of Things) Engineer to qualify the latest iOS products.  The role will be testing BT (Blue Tooths) interoperability in Apple’s innovative new phone.  The job posting also indicates the the engineer must have an understanding of OS X, Windows and/or Unix as well as familiarity with object oriented methodology.

The IOS Blue IOT engineer will focus on testing BT interoperability in Apple’s innovative new phone.  Interoperability in simple terms is the ability of two systems to “inter-operate”.  As it relates to Apple it looks like the “innovative iPhone” will be designed to exchange and automatically interpret information shared between two or more computer systems, which could be devices or actual computers.  At first I was thinking interoperability would allow the “innovative phone” to talk to an iWatch to share information but it looks like Apple is going even bigger than that.  According to the job posting the engineer needs to understand various computer operating systems including OS X, Windows and Unix.  Apple is working on the ability of the iPhone to exchange and automatically interpret information with various computer operating systems through its Blue Tooth technology.

The last part of the job is familiarity with object oriented methodology. Object oriented methodology is what Steve Jobs described as the holy grail of software programming during his 1994 Rolling Stones interview. Below are some comments on object oriented metrology during Steve Jobs’ 1994 Rolling Stones interview.

This time the Holy Grail is object-oriented programming; some have compared the effect it will have on the production of software to the effect the industrial revolution had on manufactured goods. “In my 20 years in this industry, I have never seen a revolution as profound as this,” says Jobs, with characteristic understatement. “You can build software literally five to 10 times faster, and that software is much more reliable, much easier to maintain and much more powerful.”

Object-oriented programming will change that. To put it simply, it will allow gigantic, complex programs to be assembled like Tinkertoys. Instead of starting from the ground up every time, layering in one line of code after another, programmers will be able to use preassembled chunks to build 80 percent of a program, thus saving an enormous amount of time and money. Because these objects will work with a wide range of interfaces and applications, they will also eliminate many of the compatibility problems that plague traditional software.

Apple seems focused on creating a new ecosystem of Apple devices that can automatically exchange and interpret data between multiple devices and operating systems. Apple’s Blue Tooth IOT (Internet of Things) seems destined to bring wireless charging to the next generation of “innovative iPhones” as well as some other amazing inter operating functionality between connected devices.

Below is the information from Apple’s Job Posting

You will join a dynamic team responsible for qualifying the latest iOS products. Your focus will be testing BT interoperability in Apple’s innovative new phone. The successful candidate will complete both documented and adhoc testing to ensure high quality releases.

Understanding of OS X, Windows and/or Unix

Familiarity with object oriented methodology

 

bluetooth bluetooth2

Reuters is reporting that the 4.7″ iPhone 6 will be arriving in August, one month earlier than most other media outlets. Reuters cited the Economic Daily News as the source of the report. The report also indicated that 80 million iPhone 6 handsets would be produced including a 5.5″ handset that is expected to arrive in September.

From Reuters:

TAIPEI, May 9 (Reuters) – Apple Inc will unveil the next incarnation of its popular iPhone series in August, one month earlier than industry watchers were generally expecting, Taiwanese media reported on Friday citing unidentified supply-chain sources.

A 4.7-inch screen version of the iPhone 6 will reach stores in August, the Economic Daily News reported without specifying which markets would receive the phone first.

A 5.5-inch or 5.6-inch model will be released in September, the newspaper said, as the iPhone 5 series was previously.

People involved in the supply chain had earlier confirmed to Reuters that there will be a 4.7-inch version of the iPhone 6 and a 5.5-inch version.

Together, the Economic Daily News said 80 million iPhone 6 handsets would be produced this year

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by Matt Margolis

News broke Friday that Apple acquired Luxvue Technology Corporation for an undisclosed amount of money.  Luxvue  Technology was unknown to nearly everyone until their acquisition by Apple put them in the spot light.   I think the biggest question you want to know is, how can I make money from this?

According to Crunchbase Luxvue Technology was incorporated in 2009, based in Santa Clara, California and they develop low-power, micronLED based displays for consumer electronics applications.

LuxVue Technology Corporation develops low-power, microLED-based displays for consumer electronics applications. LuxVue Technology Corporation was formerly known as Papierlos Corporation. The company was incorporated in 2009 and is based in Santa Clara, California.

LuxVue Technology Corporation develops low-power, microLED-based displays for consumer electronics applications. LuxVue Technology Corporation was formerly known as Papierlos Corporation. The company was incorporated in 2009 and is based in Santa Clara, California. – See more at: http://www.crunchbase.com/organization/luxvue-technology#sthash.iBHexiMz.dpuf
LuxVue Technology Corporation develops low-power, microLED-based displays for consumer electronics applications. LuxVue Technology Corporation was formerly known as Papierlos Corporation. The company was incorporated in 2009 and is based in Santa Clara, California. – See more at: http://www.crunchbase.com/organization/luxvue-technology#sthash.iBHexiMz.dpuf

LED is very interesting topic, first of all LED is more efficient than fluorescent lights.  Second of all, LED is becoming the standard light bulb all around the world, one bulb at a time.  One of the most vital ingredients in LED lighting is sapphire. What makes sapphire so special?

Synthetic single-crystal sapphire is a single crystal form of corundum, Al2O3, also known as alpha-alumina, alumina, and single crystal Al2O3. Sapphire is aluminum oxide in the purest form with no porosity or grain boundaries, making it theoretically dense. The combination of favorable chemical, electrical, mechanical, optical, surface, thermal, and durability properties make sapphire a preferred material for high performance system and component designs.

One of the biggest issues with battery life are displays that drain your battery just from emitting light.  LED lights are known for their durability, low energy consumption and long-lasting life span.  What if an electronic device display shared was also composed of LED?  How much many hours would be added to your battery per charge?

Apple’s sapphire partner GT Advanced Technologies is currently producing sapphire for consumer electronics as well as the LED industry (LED customers currently exclude Apple).  GT is an expert in producing sapphire for LED as well as sapphire for consumer electronics.  The sapphire used for LED lighting does not need to be as perfect because it’s not the same as a sapphire cover screen that you look through to see your display.  The sapphire layer is the body (bottom) layer that the LED display would be stacked on.

Apple acquired LuxVue Technology along with its long list of patents.  One of the patents that sparked my interest was Luxvue’s (now Apple’s) LED Array patent.  What is interesting about this patent is that the bottom layer that makes up the LED display includes not only sapphire as an option but also SiC (Silicon Carbide).  According to the patent both materials can be transparent, but currently sapphire is drastically less expensive of the two options but SiC has a significant performance benefit over sapphire.   SiC most likely won’t reach consumer electronic products for several years (5?, 10?, 15? years) at the earliest, but the switch from Si (Silicon) to SiC (Silicon Carbide) is currently underway in Power Electronics.

Conclusion

  • In 2014 Apple is going to be the first high volume consumer electronics manufacturer to cover its devices with sapphire.
  • Apple is going to adopt LED displays within the next 12 to 18 months across its portfolio of iDevices
  • GT Advanced Technologies will produce and process hundreds of millions of sapphire substrates annually that will end up below Apple’s LED displays before the end of 2015.
  • Apple’s adoption of LED displays will add a “new significant layer” of reoccurring revenue to GT’s top line before the end of 2015
  • The relationship between GT Advanced Technologies and Apple goes much deeper than just sapphire cover screens

 

For your reading pleasure Luxvue’s (now Apple’s) LED Array patent is highlighted below.

A micro light emitting diode (LED) and a method of forming an array of micro LEDs for transfer to a receiving substrate are described. For example, the receiving substrate may be, but is not limited to, a display substrate, a lighting substrate, a substrate with functional devices such as transistors or integrated circuits (ICs), or a substrate with metal redistribution lines. In an embodiment, a micro LED structure includes a micro p-n diode, a reflective metallization stack below a bottom surface of the micro p-n diode, and an electrically insulating spacer spanning a portion of sidewalls of the reflective metallization stack and laterally surrounding the reflective metallization stack, where the reflective metallization stack is between the micro p-n diode and a bonding layer formed on a substrate. In an embodiment, the bonding layer has a liquidus temperature of approximately 350° C. or lower, and more specifically approximately 200° C. or lower. In an embodiment, the bonding layer is an alloy bonding layer. For example, the bonding layer may be an indium-silver (InAg) alloy. Depending upon the manner of formation, the bonding layer can have a uniform concentration, or a gradient concentration.

In a particular embodiment, growth substrate 101 is sapphire, and the p-n diode layer 110 is formed of GaN. Despite the fact that sapphire has a larger lattice constant and thermal expansion coefficient mismatch with respect to GaN, sapphire is reasonably low cost, widely available and its transparency is compatible with excimer laser-based lift-off (LLO) techniques. In another embodiment, another material such as SiC may be used as the growth substrate 101 for a GaN p-n diode layer 110. Like sapphire, SiC substrates may be transparent. Several growth techniques may be used for growth of p-n diode layer 110 such as metalorganic chemical vapor deposition (MOCVD). GaN, for example, can be grown by simultaneously introducing trimethylgallium (TMGa) and ammonia (NH3) precursors into a reaction chamber with the sapphire growth substrate 101 being heated to an elevated temperature such as 800° C. to 1,000° C. In the particular embodiment illustrated in FIG. 1A, p-n diode layer 110 may include a bulk GaN layer 112, an n-doped layer 114, a quantum well 116 and p-doped layer 118. The bulk GaN layer 112 may be n-doped due to silicon or oxygen contamination, or intentionally doped with a donor such as silicon. N-doped GaN layer 114 may likewise be doped with a donor such as silicon, while p-doped layer 118 may be doped with an acceptor such as magnesium. A variety of alternative p-n diode configurations may be utilized to form p-n diode layer 110. Likewise, a variety of single quantum well (SQW) or multiple quantum well (MQW) configurations may be utilized to form quantum well 116. In addition, various buffer layers may be included as appropriate. In one embodiment, the sapphire growth substrate 101 has a thickness of approximately 200 μm, bulk GaN layer 112 has a thickness of approximately 0.5 μm-5 μm, n-doped layer 114 has a thickness of approximately 0.1 μm-3 μm, quantum well layer 116 has a thickness less than approximately 0.3 μm and p-doped layer 118 has a thickness of approximately 0.1 μm-1 μm.

In the Figure below a layer of Sapphire and or SiC is represented by “101”

LED Display

 

Full Disclosure: I am long GTAT and Apple’s newest acquisition will result in a “new significant layer” of reoccurring sapphire revenue from Apple, which is likely to begin before the end of 2015.

 

 

By Matt Margolis

sapphire screen

Apple and GT Advanced Technologies signed their statement of work (SOW) on October 31st ,2013.   The agreement between the two companies does not identify what “sapphire materials” GT will be providing Apple, but I can assure you that the answer is sapphire cover screens.  The only question that remains open is how fast will Apple adopt sapphire cover screens across their portfolio of iDevices.  Apple has purchased, updated and retrofitted a 1.3 million square foot facility in Mesa, AZ for GT to occupy and grow sapphire boules.   Based on a recent report by UBS, GT is growing sapphire boules, coring the boules into a predefined ‘form factor” and shipping the sapphire cores to China to be processed into sapphire cover screens.

During the Q2 2012 conference call (see comments below) on August 2nd 2012,  GT  indicated that they were actively working with several customers and major end market players to qualify and certify sapphire produced from their ASF systems for use of sapphire in handheld mobile devices.  Just 3 weeks later GT signed a confidentially agreement and 14 months later the two companies agreed to a SOW for to produce sapphire materials in Mesa, AZ.  I expect Apple to introduce the iPhone 6 covered in sapphire between June and September, which approximately 2 to 2.5 years after GT indicated their sapphire for mobile devices was being qualified and certified.

One of the most promising opportunities in the consumer market is the broader adoption of Sapphire and handheld mobile devices. GT’s ASF grown Sapphire is particularly well suited for these applications, and we’re actively working with several of our customers and major end market players that have approached us to qualify and certify sapphire produced on our ASF systems as a more cost-effective, scratch-resistant and optically superior alternative to other materials currently in use.

We believe that GT is the only sapphire equipment company capable of quickly scaling to support the quick ramp of quality, cost and sizable volumes that the mobile device market could require as sapphire gains wider market adoption. (GTAT Q2 2012 Prepared Remarks)

I wanted to spend some time focusing on Apple and GTAT relationship in the past just to show how long it took to go from sample testing to market introduction for sapphire cover screens on a mobile device.  The infrastructure and equipment ramp up would have been much less if GT did not engage with Apple but in genera it takes a good 18 to 24 months to go from sampling product to market introduction on a mobile device.

Rubicon’s Acknowledgement that GT will be providing Sapphire Cover Screens to Apple

Rubicon is equipment maker and sapphire producer. Unlike GT, they do not sell their equipment and they are truly a one trick pony.  Rubicon is primarily a sapphire producer for the LED market but as indicated by its management they are growing selling small sapphire cores to its polishing partners.  Rubicon’s smaller diameter cores of sapphire that are being sold for mobile devices are related to  the production of sapphire lens covers, which have been adopted by several phone manufacturers since Apple led the way in 2012.

Rubicon made some very telling comments regarding the sapphire use in mobile devices, specifically the use of sapphire for cover screens during their Q1 2014 conference call (Courtesy of Seeking Alpha).

The use of sapphire in mobile devices is a relatively new application and has a normal potential for growth. Smartphone manufacturers are looking to incorporate sapphire on the exterior of their devices due to the strength and optical characteristics it provides.

Thus far, most of the demand for these applications had come from one manufacturer. However, we believe we will begin to see greater adoption of sapphire in mobile devices. We participate in this market, primarily by selling a significant amount of smaller diameter core to our polishing partners. We are also well positioned to sell larger diameter bulk crystal in a variety of shades and dimension into the market as additional applications develop.

We also believe that we are in the very early days of the use of sapphire in the exterior mobile devices for applications like camera lens covers and home buttons. Based on our knowledge of the marketplace with the exception of one competitor who is building out capacity for a specific customer, none of the existing sapphire producers are planning to add capacity in the current environment and some competition is now leaving the market.

First of all, I think it’s very interesting that Rubicon even tried to cryptically cover up (no pun intended) the sapphire cover screen build out, “one competitor,” who is building out capacity for a “specific customer”.  The translation is GTAT is building out capacity in Mesa, AZ to cover Apple’s devices with sapphire screens.  The other very interesting point is that, “none of the existing sapphire producers are planning to add capacity in the current environment and some competition is now leaving the market”.  This is the clearest indication yet that GT’s build out in Mesa is on track and there has not and will not be a “Mayday Mayday Mayday” call to another sapphire producer to step in and help GT will Apple’s needs anytime soon.   Spare sapphire industry capacity outside of Mesa, AZ is absorbing mobile sapphire growth as well as players leaving the competition all together.

Conclusion

At this point GTAT is on target to supply sapphire screens for Apple devices by the middle of 2014, starting with the iPhone 6 and iWatch and followed later by the refreshed iPod.  It is still too early for me to assess the likelihood that GTAT will supply sapphire cover screens for the iPad, iPad mini and the rumored 12.9″ over sized iPad.  I can tell you Apple’s plans for sapphire do not begin and end with the iPhone and the iWatch but they will extend in some fashion across all of Apple devices, current and future.  Furthermore, it is also clear to me that even Rubicon knows that GT will be supplying sapphire screens to Apple.  Additionally, Rubicon indicated that, “none of the existing sapphire producers are planning to add capacity,” which is a clear indication that Apple and GT have built a moat around sapphire cover screens for at least the next few years.

moat

 

Sapphire Cover Screens: As Apple and GTAT lead the charge others will follow! 

Apple led the way in 2012 with sapphire camera lens covers and the rest followed.  Apple led the way with a sapphire home button in 2013 for biometric scanning and the rest are slowly following.  Apple will lead the way with sapphire cover screens in 2014 and the rest follow, but it might will them a few years or even longer.

If you don’t believe the Obscure Analyst just take a look at what Rubicon said 3 months ago during their Q4 2013 conference call and last week during their Q1 2014 conference call.

 

Rubicon Q4 2013 Conference Call

Apple was the first company to adopt a sapphire camera lens cover and now other smartphone manufacturers are also including sapphire lens covers for their newer models. Apple’s latest iPhone model, the 5S incorporated a sapphire home button.

The switch to sapphire for their home button in the 5S was because sapphire is virtually scratch proof and offers improved touch capacitance, which are important characteristics to ensure the effectiveness of the fingerprint recognition security they have built into the phone. It is our expectation that other mobile device manufacturers will also add similar functionality soon.

Rubicon Q1 2014 Conference Call

The use of sapphire in mobile devices is a relatively new application and has a normal potential for growth. Smartphone manufacturers are looking to incorporate sapphire on the exterior of their devices due to the strength and optical characteristics it provides.

 

Full Disclosure: I am long GTAT and I can’t wait to pre-order my sapphire covered iPhone 6

by Matt Margolis

Last week various Apple blog sites brought to light KGI Securities analyst Ming Chi Kuo report, who is known for supplying “more” reliable information on Apple’s product lineup compared to other Apple analysts.  The KGI report also included Apple’s 2014 product roadmap which forecasts the release of Apple’s all-new designed iPhone 6 featuring 2 sizes and 2 separate release dates.  Kuo is anticipating the 4.7″ iPhone 6 to be released in September and the 5.5″ iPhone 6 to be released in December.  I’m going to defer comment on the other products listed on the launch and focus squarely on sapphire cover screens and the iPhone 6.

 

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Kuo on Sapphire Cover Screens (courtesy of Yahoo)

 

The analyst claims that Apple will switch from Gorilla Glass to sapphire crystal to cover the iPhone’s displays, but possibly only on the high-end models with 64GB of memory. This is due to supply constraints, Kuo said, though ultimately Apple will supposedly move all of its iPhone models to sapphire.

Part of the reason for the shift to sapphire, Kuo said, is that Touch ID may soon be embedded in iPhone display panels rather than home buttons, and sapphire is needed to ensure fingerprint reading accuracy.

 

Kuo on Sapphire Cover Screens (courtesy of 9to5Mac)

Other iPhone 6 predictions state that only the 64 GB version of the 5.5-inch model will include a sapphire Touch ID cover due to supply issues.

 

Kuo’s Sapphire Takeaway

Kuo believes sapphire cover screens will only be used on the high-end 64 GB version of the 5.5 inch iPhone 6 model due to supply constraints.  According to CNET, Kuo is estimate the more popular 4.7″ iPhone 6 will sell an estimated 60 million units in 2014.  If the 4.7″ iPhone 6 is estimated to sell 60 million units the December The estimated release date of December suggests that he is only forecasting 8 to 10 million units sold of the 5.5″ iPhone 6.  If sapphire is going to be only used on the 64GB version of the 5.5″ it would translate into maybe 2-3 million iPhones sold with sapphire screens in 2014.  iWatch sales are expected to be up to 10 million units in 2014 and those are expected to feature a sapphire display.  It takes approximately 3-4 iWatch screens to make 1 sapphire cover screen, if you convert 10 million iWatches to cover screens it would be 2-3 million sapphire cover screens.  Kuo is estimated that GT Advanced Technologies can only supply Apple the equivalent of 4 to 6 million sapphire cover screens worth of material in 2014.

Does Kuo’s sapphire cover screen estimates stack up?  Also, how does information like “supply restraints” become public knowledge since Apple and GT Advanced Technologies are performing the biggest cover up since the US governments close lips regarding Area 51.

Kuo’s Sapphire Estimate does not Stack up to GTAT’s 2014 Guidance

GT’s CEO Tom Gutierrez  along with Apple’s CEO Tim Cook have both been grilled by various news agencies and stock analysts and neither one has said a word regarding the specifics of the project.  GT gave out financial projections during their Q4 2013 conference call including expectations that 15% of total revenue will occur in the 2nd half of 2014 and sapphire will account for more than 80% of total revenue in 2014.  If you take Kuo’s 6 million dollar sapphire cover screen equivalent and multiply it by $10 or even $20 per screen it only comes out to $60 to $120m in revenue, to put this simply Kuo’s sapphire prediction just doesn’t add up.  GT’s guidance is below:

We expect that our revenue and profitability will be very back end loaded this year given that our sapphire materials business will be in ramp up mode. As we indicated on our last call, we expect revenues in 2014 to range from $600 million to $800 million, with approximately 15% of the total revenues occurring in the first half of the year. We expect our sapphire segment to account for more than 80% of total revenue in 2014. The sapphire segment includes the company’s ASF equipment and materials businesses in the LED, industrial and consumer electronics markets.

Furnace Deliveries are Estimated at over 1,500 through 3/10/14

Kuo is estimating that the equivalent of 6 million sapphire cover screens, just for kicks I wanted to know how many active ASF furnaces it would take to produce 6 million sapphire cover screens.  The answer is roughly 50 ASF furnaces.  GT’s Sapphire Production and R&D facility in Salem, MA has over 80 ASF furnaces inside its 50,000 square foot walls.  The Mesa, AZ sapphire facility measures 1.3 million square feet or the equivalent of 56 of GT’s Salem facilities.  Needless to say Apple is not going to waste over $2b in cash to produce the equivalent of 6 million cover screens that could have been grown from GT’s Sapphire Production and R&D facility in Salem, MA.  Yet again, to put it simply Kuo’s sapphire prediction does not add up.

Since I love beating up others with facts, I want it to be known that the sapphire plant in Mesa went live with 140 tools (furnaces) on January 10th of 2014 within Module 1 of the Mesa sapphire plant, which measures just 12,500 square feet according to building permit records. I also want it to be known that by mid February GT had GT applied for a building permit to make changes to the medium voltage fuse to accommodate the tool load.  My point here is GT had already ramped up the Mesa sapphire plant production by the middle of February and given GT’s track record they could have all 1,600 furnaces online and growing sapphire by of March 2014 without a problem.  GT could supply 70 million iPhone 6 cover screens in 4 months or less with 1,600 furnaces active and growing sapphire.  Even if only 800 furnaces were active GT could still deliver enough sapphire cover screens to meet Kuo’s total estimated iPhone 6 sales in 2014. Yet again, to put it simply Kuo’s sapphire prediction does not add up.

 

Larger Form Factor Equals More Scratched, Cracked and Broken Gorilla Glass Screens on Apple’s Devices

Perhaps the biggest issue being ignored by Kuo is why on earth would Apple introduce larger iPhones without changing the cover glass material from Gorilla Glass to sapphire crystal?  One in four Apple iPhone owners are already walking around with a cracked or shattered screen and increasing the size of the display will only lead to more breaking and shattering of iPhone 6 displays made out of Gorilla Glass.  Perhaps a comment from GT’s CEO Tom Gutierrez on this topic might be a little more convincing!

Well, quite honestly, the problem doesn’t change with form factor. The screens, the bigger they’ve gotten, the more prone to breaking and cracking and scratching they are. But honestly, because the larger form factors you stick in your pocket, you don’t hold out. And so our view is the form factor doesn’t change anything. The form factors that we know of, that are being considered by the OEMs that we’re talking to, are inside the range that can be accessed by the technology, both on the fabrication side that’s being developed, as well as our growth technologies. If — one thing probably, as they get bigger, our growth technology probably has preferential treatment because of the form factor of our boules relative to some of the other technologies that are out there. So we’re comfortable. Nothing that’s happening in the marketplace is diminishing our opportunity. In fact, it’s just the opposite.  (Seeking Alpha GTAT Q4 2012 Conference Call)

CEO Tom Gutierrez  made is very clear in the statement above that the larger the form factor (size of the phone) the more prone (Gorilla Glass) will be to breaking, cracking and scratching.  Gutierrez also believes that the focus on larger screens will only increase GT’s market opportunity.  Kuo has completely disregarded customer satisfaction or lack there of, that would result, if Apple introduced larger screens with Gorilla Glass that were even more susceptible to breaking, cracking and scratching.   Yet again, to put it simply Kuo’s sapphire prediction does not add up.  

 

Conclusion

I’ve made it very clear that Kuo’s sapphire prediction that sapphire covers will only be placed on the Apple’s 5.5″ 64 GB iPhone 6 simply does not add up.  Not only will Apple cover the 4.7″ and 5.5″ iPhone 6 with sapphire alongside the iWatch but Apple may go ahead and cover the iPad and iPod as well.  Sapphire yield is not a risk to Apple’s 2014 product lineup but might actually be a welcomed boon for Apple’s customers and shareholders.

I’ll leave you with one final comment from GT Advanced that dates back to May 2012, just 3 months before Apple and GT Advanced Technologies officially signed their confidentiality agreement.  GT and Apple clearly believe in GT’s ability to quickly scale a sapphire operations and deliver quality, low-cost sapphire in unprecedented volumes.

We believe that GT is the only sapphire equipment company capable of quickly scaling to support the quick ramp of quality, cost and sizable volumes that the mobile device market could require as sapphire gains wider market adoption. (GT Advanced Technology Q1 2012 Conference Call courtesy of Seeking Alpha)

 

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