Archive for the ‘Mesa Sapphire Plant’ Category

As promised here are the latest pictures that were taken April 28th and April 29th of the Apple/GT Advanced sapphire plant located in Mesa, AZ.  The official name of the sapphire operation is “Project Cascade”.  The outside of the building including the crucial power supply to the building including the cooling system looks complete.

 

Steam Above Cooling System 6:30 AM on 4/28

first signs of steam

 

Employee Entrance “GT Advanced Technologies”

employee entrance 2 employee entrance

Solar Arrays outside of Parking Lot

solar arrays and parking solar arrays and parking2

solar arrays and parking3

Employee Parking lot 7:00 AM and 10:30AM local time (looks crowded)

Parking lot 7am  parking lot 1030

Parking lot 7am 2

Electrical Substation

Electrical Substation Electrical Substation3 Electrical Substation2Electrical Substation4

Cooling System on Back End of Electrical Substation

Cooling System Connection to Building cooling system 4 cooling system3 cooling system1 cooling system2

 

Full Disclosure I am long GTAT and have no plans to buy or sell any holdings

 

 

 

 

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A photo taken today and shared with me an hour ago clearly indicates steam is coming out near the cooling systems by the electrical substation. Eye witness account indicated that the parking lot was very full overnight and a flock of employees arrived at 6am for work this morning. The eye witness also counted 21 sets of 3 phase electrical lines powering the facility.

This is the best evidence yet that the Mesa Sapphire facility is “full steam ahead” and is up and running and producing sapphire around the clock.

I had previously indicated that the Mesa sapphire plant was likely operating at or near full capacity by the end of March, just weeks after being granted approval to being full operations on 3/19/14 by the Federal Trade Zone (FTZ).

I will have additional images to share later.

Full Disclosure: I am long GTAT and have no plans to buy or sell any holdings.

by Matt Margolis

Apple submitted two applications to the Foreign Trade Zone (FTZ) No. 221 for approval.  Apple’s application for Sub Zone designation at the Apple/GT facility was submitted to the FTZ office on December 17th, 2013 and Apple’s application for “Interim” Production Notification Application was submitted to the FTZ office on December 30th, 2013.  The Interim Production Notification Application indicated that Apple had an aggressive go-live timeline of February 2014.  The Apple/GT facility was granted a temporary C-of-O (Certificate of Occupancy) to commence with occupancy and production of Quick Start 140 area on January 10th, 2014.  Quick start 140 was located in Module 1 of the Mesa facility and contained 140 “tools,” which are also know as sapphire growth furnaces.

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Apple’s application for Sub Zone 221 designation was submitted to the FTZ office on December 17th, 2013. The Apple/GT facility was formally granted Sub Zone approval on March 19th, 2014.  The Sub Zone approval was the final step required before Apple and GT could begin in earnest to manufacture intermediate components for consumer electronics for exports as indicated in their original Sub Zone application.

Apple Inc./GT Advanced Technologies Inc., Mesa, AZ, 221A, approved 3/19/2014 (S-5-2014)

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Another interesting fact to point out is the Master Development and SOW agreement between Apple and GTAT is that the agreement requires any additional furnace purchases, would be negotiated in good faith prior to the second Milestone Payment made under the Prepayment Agreement.  GT reported during their Q4 2013 conference call on February 24th, 2014 that they had received the second Milestone Payment from Apple.  The receipt of the second Milestone Payment from Apple signals that the furnaces that were required to be purchased and deployed as part of this agreement were all ordered on or before February 24th, 2014.

According to Port Authority records, sapphire growth furnace deliveries began heading to Mesa, AZ on December 2nd, 2013 and the last known delivery was recorded on March 10th, 2014.  I have tracked 1,265 furnace deliveries that have passed through Port Authority.  Additionally, any and all domestic furnaces that did not pass through Port Authority (i.e. truck) would not be caught in my sapphire furnace fishing net.

I have assumed GT deployed $251m of PPE ($180m) and Inventory ($71m), which would account for 837 additional furnaces inside Mesa giving me a total confirmed/estimated of 2,102 furnaces.  The book cost that GT assigned to each furnace that was deployed and taken out of inventory could be substantially lower than $300,000 per furnace.  If, GTAT’s price per furnace is actually $30,000 lower than my estimate it would add almost 100 furnaces to my estimate, conversely a $30,000 increase would decrease my estimate by 100 furnaces.

Based on my correspondence with a sapphire industry expert, GT had previously touted their ability to ramp up 500 furnaces per month at ASF equipment customer locations.  However, GT has already informed investors that they dedicated a vast majority of their ASF capacity to the Mesa, AZ sapphire effort, which would likely drive their drive GT’s maximum furnace ramp north of 500 furnaces per month.  Based on the furnace delivery dates and GT’s touted ability to ramp up efforts and focus on Mesa I’m becoming hard pressed NOT to believe that the Apple’s Mesa Sapphire plant WAS  likely operating at or near full capacity just days after the receiving the official unlimited go-live approval from the FTZ on March 19th, 2014.

 Tracked Furnace Deliveries and Estimated GTAT Furnace Deliveries

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My Estimated # of Furnaces Purchased/Deployed in Mesa, AZ

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Apple’s purchase of additional Furnaces and Similar Furnaces will be made under the terms of Apple’s Master Equipment Purchase Agreement (the “MEPA”).  Apple and GTAT will negotiate in good faith to execute the MEPA as soon as possible following the Effective Date, but in any event prior to the second Milestone Payment made under the Prepayment Agreement. Prepayment Agreement

 

We have dedicated the vast majority of our current ASF capacity to support this multi-year commitment.  This has limited our ability to take additional ASF business in the near term and has restricted our ability to ship backlog on short notice (GTAT Q3 2013 Prepared Remarks)

 

GTAT 2012 Presentation on their Sapphire Equipment

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Apple’s Entire “Interim” Production Notification Application is Below

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Full Disclosure: I am long GTAT and have no plans to buy or sell any holdings

 

by Matt Margolis

GT Advanced Technologies reported their Q4 2013 financials on 2/24/14.  During the call GT indicated that they spent $50 million of capital in Q4 2013 and they deployed over $180 million of PP&E mostly in Arizona.   They also indicated that they planned on spending $500-600 million in capital expenditures in 2014.  Apple’s  prepayment amount of $578 million was to fund the purchase of furnaces, I am now assuming that $50m of the $578m was spent in 2013 and the remaining $528m will be spent over the 1H of 2014.

However, GT’s latest filing Form DEF 4A filed on 4/22/14, right in the middle of GT’s compensation program details indicated that GT, “re-directed its sapphire equipment inventory and supply chain capacity to preparing for its expanded sapphire material operations”. GT’s supply chain capacity re-direct likely indicates that GT shifted their current sapphire production equipment from other clients to Apple and began growing sapphire boules for Apple beginning in Q4 2013, from their production facility in Salem, MA.  I know for certain GT was looking to hire sapphire growth employees for second and third shift in Salem during Q4 2013 as evidenced by various job postings.  This recent filing might provide the most significant proof yet, that GTAT began growing sapphire for Apple during Q4, 2013.

NEOs did not receive a bonus payment under the 162( m) Incentive Plan. During the latter part of Fiscal 2013, as the Company re-directed its sapphire equipment inventory and supply chain capacity to preparing for its expanded sapphire material operations, it became apparent that the metrics forthe 162(m) Incentive Plan payout, established early in Fiscal 2013, would not be met.

According to GT’s Q4 2013 Investor Financial Summary GT’s inventory in Q4 dropped $71m, from $160m to $89m, which most likely represents the amount of  sapphire growth furnaces that were re-directed from GT’s inventory to the Mesa, AZ sapphire plant during Q4 2013.

Sapphire Inventory

I had previously estimated the number of ASF furnaces likely to land inside the Mesa, AZ facility at 2,300 furnaces.  Based on the sapphire equipment inventory re-direct indicating in the filing and my understanding of the language in the $578 million prepayment agreement I am upping my ASF furnace estimate to 2,800 to 3,000 from 2,300.

 

ASF Furnaces

 

 

My previous ASF Furnace Estimate/Assumption from March is Below

GT announced that they had deployed $180m of PPE (majority to Apple). Import records indicate that GT HK’s worldwide operations shipped furnaces from HK to Mesa, AZ.  GT management also stated, that they would spend $500-600m in capital  expenditures, with most of the heavy lifting occurring over the first half of the year.   Assuming GT is spending $500m of capital expenditures and $180m that is being deployed from existing PPE this would allow them to purchase approximately 2,300 furnaces to grow sapphire boules.

 

Full Disclosure: I am long GTAT and have no plans to buy or sell any holdings

According to GTAT’s latest SEC filing on 4/22/14, GT has received the 3rd prepayment from Apple, which leaves just one prepayment remaining. The final prepayment from Apple is expected to be received based on the agreed upon date in the prepayment agreement, which is not currently available to the public.

The Company and Apple entered into a Master Development and Supply Agreement and related Statement of Work (or the “MDSA”), pursuant to which we will supply sapphire material to Apple. In connection with this supply arrangement, we also entered into a Prepayment Agreement with Apple pursuant to which we will receive $578 million (the “Prepayment Amount”), in four separate installments, as payment in advance for the purchase of sapphire goods, of which $225 million was received in Fiscal 2013 and the second and third installment were received in 2014.

The expanded sapphire material operations are expected to generate a more stable revenue stream than the capital equipment business. This factor is expected to be beneficial to the long-term prospects and long-term value of the Company.

In order to prepare to meet the sapphire material supply obligations under the MDSA, management made a strategic decision to allocate much of its sapphire and other resources to the establishment of our expanded sapphire material operations. These decisions had a negative impact on the financial results for Fiscal 2013 as short-term revenue opportunities from equipment sales for the second-half of Fiscal 2013 had to be delayed in order to prepare to meet the sapphire material obligations to Apple. The Company’s Board of Directors supported this strategic decision of management and believes it will result in a more sustainable and value generating company.

The details available regarding the timing of prepayments between GTAT and Apple are below:

2. Prepayment.

(a) Subject to Sections 2(c) and (d) below, and provided that, at the time for each payment (i) no Trigger Event (as defined below) has occurred and (ii) there are no ongoing disputes under the Facility Lease Agreement which have a material impact on the use of the manufacturing facility to be located in Mesa, AZ that Apple is purchasing and developing (the “Mesa Facility”) for its intended purpose, Apple will make the Prepayment by remitting funds to an account designated by GTAT as follows (the “Milestone Payments”):

· $[***] within [***] Business Days after execution of all of the Transaction Documents;
· $[***] by close of business on [***];

[***] Portions of this exhibit have been redacted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission

· $[***] by close of business on [***];
· $[***] by close of business on [***].

(b) The Prepayment proceeds shall be used exclusively to [***].

by Matt Margolis

Based on my review of the Mesa sapphire plant building permits it seems likely the sapphire manufacturing plant is active within modules 1 through  module 4.  Tool platforms (platforms that hold ASF sapphire growth furnaces) have been installed within the first 4 modules and each of first 4 modules (areas) appear to have been equipped with fire alarms and FS/TS monitoring at each Tool platform.  I’m taking an educated guess that FS/TS is referencing flat screen (FS) and touch screen (TS) monitors on each Tool platforms, which would seem to make a lot of sense.  Module 1 and Module 2 are known to be 12,500 square feet, Module 3 square footage is unavailable and Module 4 measures 162,483 square feet, which is large enough to hold well over 1,500 ASF growth furnaces.

Mesa Module 4 Building Permit Image 162,483 square feet

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The most recent building permit issued on 4/17/14 indicates that a request to work on the “central utility plant” to work on heat exchangers, cooling towers and installation of additional fan coil units. The images below that were taken on 4/10/14 indicate the exterior construction on the cooling towers and electrical station appear complete.

The 4/17/14 building permit description indicates that Apple is requesting additional work inside the uninterruptible power systems (UPS) and battery rooms (yes plural).  For any of us who have not been inside a battery, this room within a manufacturing plant houses battery backup for uninterruptible power systems (UPS) and is critical to provide power if any outages were to occur. If Mesa loses power the UPS would kick in and deliver the necessary power to the ASF sapphire growth furnaces.   Also, an additional request was also made to add exhaust fans with spark proof motors and H2 sensors in the battery rooms.
Mesa Cooling Towers from 4/10/14

April 10 West Water Towers

Mesa Electrical Statio  from 4/10/14

April 10 West Electrical Station

Sample Battery Room image from bsn and is not directly related to the Mesa plant in any way!

battery room sample

Fan Coil Unit Sample image and is not directly related to the Mesa plant in any way!

Fan Coil Unit Example

 

ADDENDA TO PACKAGE A02K – DRB016. REF BLD2014-00440. WORK IN CENTRAL UTILITY PLANT INCLUDING HEAT EXCHANGERS, COOLING TOWERS, AND ASSOCIATED PIPING AND ELECTRICAL FOR ADDITIONAL FAN COIL UNITS, I AND C POINTS FOR THE CENTRAL PLANT AND NEW EXHAUST FANS FOR THE UPS AND BATTERY ROOMS. LIGHTING FOR N AND S E-HOUSE AND PUMP HOUSE ALSO INCLUDED.

 

ADDENDA TO PACKAGE A04E – DRB042. INCLUDES EXHAUST FANS WITH SPARK-PROOF MOTORS AND H2 SENSORS IN BATTERY ROOMS.

 

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Fabrication Area with Centrifuge Platforms

Another interesting item is the fact that the Mesa facility includes a fabrication area that has been outfitted with centrifuge platforms.  Centrifuges are usually used to separate liquids but other forms of centrifuges include analytical centrifuges, which can study just about anything including proteins and sediment.

ADDENDA TO BLD2013-05895, A04D DRB018, FABRICATION AREA BASE BUILD. INCLUDES CONSTRUCTION OF CENTRIFUGE PLATFORMS AND BUILD OUT OF FABRICATION OFFICE AND CONFERENCE, COPY, AND BREAK ROOMS.

 

Sample Centrifuge Image from (Huada) and is not directly related to the Mesa plant in any way!

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Product Recycle Room 4,752 square feet

The Mesa facility is equipped with a 4,752 square foot product recycle room.  A permit was issued on 3/4/14 to install a Pneu-Lectric double interlocked preaction system (these are fancy words for a very expensive integrated alarm/sprinkler system).  If you are bored you can read about an existing Pneu-Lectric model here.

REF BLD2014-00161 & BLD2014-00263. Double interlock pre-action system to cover 4752 s.f. approx PRODUCT RECYCLE ROOM within building.

 

 

 

 

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

 

 

by Matt Margolis

Thanks again to my street analyst that provided pictures of the exterior building that were taken this morning on 4/10/14.  My street analyst also took pictures on 2/16/14 so I can have some fun comparing the images to show the significant progress that has been made in just under 2 months.

  • Line of solar arrays have been installed on the North-side of the building and you can notice the reflection from the sun on the building all around the 3740 BLD-1 sign
  • 2 Huge water storage tanks, massive cooling tower system and large electrical station appear to be completed
  • 100 foot long and 75 foot high pile of dirt near the large electrical station is gone since 2/16/14 and the large crane has moved
  • On the northwest side of the building there appears to be an extremely large generator along with some piping that goes into the building and directly into the ground.
  • The parking lot was full and trucks and golf carts were racing around the building hurrying to get work done.
  • The city of Mesa is in the progress of expanding the main roads leading up to the plant from 2 lanes across to 4 lanes across.
  • A significant amount of large spools of electrical cable that were partially used were seen on the ground outside of the building.
  • The north side of the building seems almost complete as it has been landscaped.

Below are the 2/16/14 and the 4/10/14 images of the West Exposure as well as the closeup of the electrical station that is between the crane and the water towers in the 4/10/14 image

Electrical Station 4/10/14

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4/10/14 West Exposure Electrical Station, Cooling Tower System and Water Storage Towers

  • White long building is new and has been completed since 2/16/14  just under crane

  • Black structure to the right of water storage power has been completed

  • Electrical Station has been completed

  • Piping connected to water storage for cooling system is now complete

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2/16/14 West Exposure Electrical Station, Cooling Tower System and Water Storage Towers

  • Incomplete electrical station

  • Incomplete piping from water storage towers

  • Massive 100 foot long and 75 foot high dirt pile

  • Crane outside of water towers has now moved

  • Next to water storage (right) is another structure which is incomplete but has been completed on 4/10/14 photo

 

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Solar Arrays Installed on North Side (notice reflection on building and solar arrays up close to building

April 10 Northside Solar Arrays April 10 Northside Solar Arrays Image 2

Northwest Exposure – Large Generator and Piping Entering Building and connected to the ground

Northwest Piping and Generator

 

Northern Exposure Looking Complete on 4/10/14

2/16/14 (Left) versus 4/10/14 (Right)

 

Feb 17 Northern ExposureApril 10 Northern Exposure

Parking lot looking Full on 4/10/14.  

2/16/14 (Left) versus 4/10/14 (Right)

Feb 17 ParkingApril 10 Parking

Extra Electric Cables Everywhere and large piping (4/10/14)

Extra Electric Cables Extra Electric Cables 2

 

West Side Rock Truck Frenzy (4/10/14)

April 10 West Truck Derby

Elliot Road Landscaping Looking Complete (4/10/14)

Elliot Road Landscaping

 

 

 

by Matt Margolis

I’ve had a bit of time to do some more digging (a few hours) and here is what I know so far about Project Cascade aka the secret sapphire project in Mesa, AZ.  The permit dates are an approximate date in some cases because the Mesa, AZ Development Services Division did stamp all applications with a received date.  However, to determine the permit date I was able to look up the permit numbers above and below the permits for Project Cascade to come up with a very reasonable permit grant date.

Based on the building permit description below for permit # BLD2014-00886 it appears that the Mesa, AZ sapphire plant likely ramped up production significantly by the middle of February.  The building permit granted on (approximately 2/13/14) indicated the need for MV (Medium Voltage) Fuse Changes due to tool (furnace) load, which clearly indicates the installed and operational furnaces were putting some pressure on the power grid inside Mesa by the middle of February.    As you can see from my furnace deliveries below, I am estimating that over 1,500 furnaces were delivered to Mesa by the end of January 2014.  I have confirmed deliveries of 1,060 external furnaces and I estimated 500 furnace deliveries from GT Advanced as part of their $180m Q4 2013 deployment of assets.

ADDENDA TO PACKAGE A03E. REF BLD2013-06025. – DRB023 INCLUDES I & C ADDITIONS AND REVISIONS, MV FUSE CHANGES DUE TO TOOL LOAD, UPDATE TO LIGHTING AT J-K LINES, TELECOM IDF CABINET UPDATES AND FENCE ENCLOSURES AROUNG ELECTRICAL SWITCH GEAR.

I have tracked 1,265 ASF furnaces delivered to Mesa through 3/10/14.  GT deployed $180m of PPE in Q4 2013 and if I assume $150m of that PPE was for ASF furnaces it would equate to another 500 furnaces inside Mesa.  Assuming 1,265 furnaces purchased and delivered as of 3/10/14 plus 500 furnaces deployed from GT brings my estimated total furnaces count inside Mesa to 1,765 as of 3/10/14.  My total by month would be 1,172 in December 2013, 388 in January, 191 in February and 14 in March.   The total imports reported by Import Genius for all imports to GT Corporation (see image below) illustrate that GT’s imports spiked in December 2013 and leveled off some in January and February.

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The total imports reported by Import Genius  (see image below) illustrate that GT’s imports spiked in December 2013 and leveled off some in January and February.

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Mesa Facility 6 modules/phases referred to as 1 through 6 and  A, B and C

 

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Mesa Facility Module Sizes and Stages

Module 1 – 12,500 square feet

According to Building Permits filed Module 1 measures 12,500 square feet and will house 140 tools (ASF growth furnaces) and is referred to as the Quick Start 140 Area.  Temporary/Partial C-of-O for Quick Start 140 Area was issued on 1/10/14.  Upon execution of this C-of-O the Owner and the Owner’s tenant shall have the ability to commence with occupancy and production within the above mentioned space for an undefined period of time.  Module 1 has 1 ASF furnace for every 89 square feet of manufacturing space assuming the building permit square footage is accurate.

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Modules 2 – 12,500 square feet

According to Building Permits filed Module 2 measures 12,500 square feet.   Additionally, a different permit received on 1/27/14 requested approval to provide protection for new tools platform for Module 2.  I am estimating 140 furnaces could be up and running inside module 2, since the listed square footage is identical to module 1 at 12,500 square feet.

DEFFERED FIRE SPRINKLERS – MOD2 – REF BLD2013 06025 PROTECTION BELOW TOOL PLATFORMS IN MOD 2. DESIGN DENSITY 0.2 GPM OVER ENTIRE PLATFORM. BUILDING OCCUPANCY F1 CONSTRUCTION TYPE IIB.

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Module 3 – Size N/A

According to Building Permits I have reviewed Module 3 does not include a square footage measurement but I will keep looking. (it’s a shame that not each form was completed consistently!)

Module 4 – 163,483 square feet

According to Building Permits filed Module 4 measures 162,483 (nearly 13 times the size of Module 1).  If we assume the same space to furnace ratio, Module 3 can accommodate 1,800 furnaces.  A building permit requesting installation of fire alarms was received on 2/10/14.

(2/10/14 Building Permit) FIRE SPRINKLERS – MOD4 – REF BLD2013 06025 PROTECTION BELOW TOOL PLATFORMS & TRESTLES IN MOD 4. DESIGN DENSITY 0.2 GPM OVER ENTIRE PLATFORM AND 0.2GMP/3000SF FOR TRESTLES. BUILDING OCCUPANCY F1 CONSTRUCTION TYPE IIB.

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Below are some interesting building permit descriptions and timelines

Module 1 Go-Live 1/10/14 and commence construction on Module 2,3 and 4

Apple/GTAT was granted the approval to begin production in Module 1 on 1/10/14.  The approval was a temporary C-of-O because Module 1 still had some items to complete.  The entry below with approval granted on 1/17/14 indicates that Module 1 needs to be finished off and Module 2, 3 and 4 have not started construction but would commence construction of the manufacturing area to complete architectural, mechanical, electrical, process and systems.  This entry also indicates that Module 5 is not as far along and will only have the shell space completed once construction begins.

PACKAGE A04E. FABRICATION AREA BASE BUILD PACKAGE. INCLUDES MECHANICAL DUCTING AND PIPING AND PLUMBING AND PROCESS PIPING. DRB 009 HAS BEEN ADDED TO THIS PKG. FIRE SPRINKLERS DEFERRED – MECHANICAL DUCTS > 48″.

 

PACKAGE A03E. WORK FOR THIS PKG INCLUDES CONSTRUCTION OF THE ARCHITECTURAL, MECHANICAL, ELECTRICAL, PROCESS AND SYSTEMS FOR THE MANUFACTURING AREA INCLUDING THE BALANCE OF MOD 1, MOD 2,3,4 AND THE SHELL SPACE OF MOD 5. FIRE SPRINKLERS DEFERRED. NOTE THAT DRB010 FOR THIS PKG, ISSUED JAN 17, 2014 ADDRESSES ARCHITECTURAL AND ELECTRICAL CHANGES.

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Pump House, North and South Electric Building Permits Issues (1/27/14 and 2/7/14)

PACKAGE A02H – CONSTRUCT 2126 SQ FT PUMP HOUSE. OCCUPANCY CLASSIFICATION F-1, CONSTRUCTION TYPE IIB, FIRE SPRINKLERS DEFERRED.

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PACKAGE – NORTH ELECTRIC BUILDING. JOB #14-B-35380. BUILDING IS A 3600 SQ FT, F-1 OCCUPANCY, TYPE IIB CONSTRUCTION, FIRE SPRINKLERS.

 

PACKAGE FOR E HOUSE SOUTH BUILDING. STEEL BUILDING, 1440 SQ FT, F-1 OCCUPANCY, CONSTRUCTION TYPE IIB.

Centrifuge Platforms and Build out of Fabrication Office Permit (2/10/14)

 

ADDENDA TO BLD2013-05895, A04D DRB018, FABRICATION AREA BASE BUILD. INCLUDES CONSTRUCTION OF CENTRIFUGE PLATFORMS AND BUILD OUT OF FABRICATION OFFICE AND CONFERENCE, COPY, AND BREAK ROOMS.

 

I & C Additions, MV Fuse Changes due to Tool (Furnace) Load  Permit (2/13/14)

ADDENDA TO PACKAGE A03E. REF BLD2013-06025. – DRB023 INCLUDES I & C ADDITIONS AND REVISIONS, MV FUSE CHANGES DUE TO TOOL LOAD, UPDATE TO LIGHTING AT J-K LINES, TELECOM IDF CABINET UPDATES AND FENCE ENCLOSURES AROUNG ELECTRICAL SWITCH GEAR.

 

FABRICATION AREA BASE BUILD PKG, (MECH, PLUMBING, PROCESS PIPING AND ELECTRICAL WORK Permit (2/18/14)

ADDENDA DRB019 TO PACKAGE A04E. REF BLD2013-06024 – FABRICATION AREA BASE BUILD PKG, (MECH, PLUMBING, PROCESS PIPING AND ELECTRICAL WORK). Add break rm light/power, updated tool breakers, updated lighting in Coolant Reclaim rms, add a/c units, add power factor correction cabinets, clean rm ceiling, CDA piping, RODI piping, Coolant Reclaim piping.

 

Piping Support and Rooftop Equipment Support for Pump House Piping and Tanks Permit (2/25/14)

PACKAGE A05E. STRUCTURAL STEEL FOR TRESTLES FOR PIPING SUPPORT, FOR ROOFTOP EQUIPMENT SUPPORT, FOR PUMP HOUSE PIPING AND TANKS AND OTHER MISCELLANEOUS PIPING.

4,752 Product Recycle Room Permit (3/4/14)

REF BLD2014-00161 & BLD2014-00263. Double interlock pre-action system to cover 4752 s.f. approx PRODUCT RECYCLE ROOM within building.

Central Utility Plant, Heat Exchangers, Cooling Towers, New Exhaust Fans Permit (3/24/14)

ADDENDA TO PACKAGE A02K – DRB016. REF BLD2014-00440. WORK IN CENTRAL UTILITY PLANT INCLUDING HEAT EXCHANGERS, COOLING TOWERS, AND ASSOCIATED PIPING AND ELECTRICAL FOR ADDITIONAL FAN COIL UNITS, I AND C POINTS FOR THE CENTRAL PLANT AND NEW EXHAUST FANS FOR THE UPS AND BATTERY ROOMS. LIGHTING FOR N AND S E-HOUSE AND PUMP HOUSE ALSO INCLUDED.

 

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