Posts Tagged ‘Apple. iPhone 6’

by Matt Margolis

The smartphone innovation race seems to be in full gear. Apple is set to go sensor crazy and leverage their HealthBook App on their upcoming iPhone 6 and is expected to feature a nearly unbreakable and scratch resistant sapphire cover screen. I have read various speculation that Apple iPhone may even be able to measure the temperature in the air using very smart sensors. Over the 6 weeks the volume of 5s price cuts and leaked iPhone component images have significantly increased. Additionally, production of key components including displays, sapphire cover screens, A8 chips, DRAM memory and batteries have reportedly commenced. Apple is expected to begin selling its iPhone 6 sometime this summer between June and September.

So what is the competition adding to their device to differentiate its product line? According to Trustedreviews Samsug is looking to release a 4.5″ Samsung Galaxy S5 mini that features water resistance up to 1 meter deep and 30 minutes as well as a dust proof feature. The report indicates that the Samsung Galaxy S5 mini may debut by the end of May.

As well as capable of being submerged in water, an IP67 rating would mean the Samsung Galaxy S5 Mini would be dust proof – a feature which should make those summer time trips to the beach a little less tech troubling

According to screen grabs of the Samsung document – which has since been amended to remove reference of the upcoming phone – the S5 Mini will be capable of being submerged in up to a metre of water for as much as 30 minutes without suffering damage.

Full Disclosure: I own shares in GTAT, Apple’s newest sapphire materials provider

Apple’s mutli-touch sensor patterns and stackup patent was issued on 4/24/14.   The patent is actually a continuation of a similar patent issued in November 2009.  The 2009 patent goes by the same name but Apple has made significant improvements to the claims of the previous multi-touch sensor patent.  The patent’s focus is on multi-touch sensor panels that are stacked and thin which make them more flexible and particularly well suited for curved or other non-flat touch sensor panels.  Apple applied for the patent on December 19, 2013 and the patent was issued just 5 months later.

The date of the latest patent application falls just a month after Apple opened up the  Mesa, AZ sapphire plant.  Also in January, Apple was in the market for design engineers that would focus on the iPhone/iPod inside  Apple’s Mesa location.  The 2009 issued patent and the 2014 issued patent both include sapphire as a cover option.  However, if Apple is going to drastically change the iPhone 6 and introduce sapphire cover screens and a curved display it would make sense to experiment and file the latest application in December 2013 after the Mesa plant opened.    Perhaps Apple has already determined that they would switch from flat  to curved displays for the next generation iPhone?  Perhaps the switch from flat to curved displays explains why Reuters was reporting that the 5.5″ iPhone was experience touch screen display yield challenges?  I have to believe a flat display panel at 5.5″ would be much easier to manufacture than a curved display.

The newly issued patent claims indicate that Apple has put in some significant time and effort focused on improving the functionality of their multi-touch sensor patterns that will improve the user’s overall experience while handling a device with a curved screen. The number of individual claims has decreased from 39 to 14, however the precision of their 2014 claims versus the 2009 claims is astounding.  This newly issued patent might indicate Apple is very close to introducing a curved iPhone screen in the not to distant future.

 

Example of the 2009 Patent Claims

1. A touch sensor array comprising:

a first conducting layer comprising a row trace and a column trace;
a second conducting layer;
a first dielectric layer that separates the first conducting layer and a second conducting layer; and
one or more vias that route the column trace or the row trace to the second conducting layer prior to an intersection of the column trace and the row trace.
14. A touch sensor array comprising:

a plurality of row traces arranged in comb pattern configurations; and
a plurality of column traces comprising cross elements arranged between fingers on the comb pattern configurations.
Example of the 2014 Patent Claims

1. A touch sensor array comprising: one of a plurality of row traces or column traces arranged in pairs of opposing and spaced apart comb pattern configurations having opposing fingers facing one another; and the other of the plurality of row traces or column traces comprising a plurality of cross elements substantially perpendicularly disposed with respect to the opposing fingers on the comb pattern configurations, with each cross element having perpendicularly disposed traces corresponding to the opposing fingers of the comb pattern configurations.

9. A touch sensor array comprising: a plurality of row traces arranged in opposing comb pattern configurations, each opposing comb pattern configuration having finger elements extending toward the opposed comb pattern configuration, and defining finger regions between the finger elements; and a plurality of column traces comprising plural rows of traces and perpendicular cross elements, the rows of traces arranged parallel to the finger elements and extending between each of the finger elements within the finger regions of the opposing comb pattern configurations, and the cross elements extending between the opposing comb pattern configurations continuously over multiple row traces but not extending between the finger regions.

14. A multi-touch mouse comprising a touch sensor array comprising: a plurality of row traces arranged in opposing comb pattern configurations, each opposing comb pattern configuration having finger elements extending toward the opposed comb pattern configuration, and defining finger regions between the finger elements; and a plurality of column traces comprising plural rows of traces and perpendicular cross elements, the rows of traces arranged parallel to the finger elements and extending between each of the finger elements within the finger regions of the opposing comb pattern configurations, and the cross elements extending between the opposing comb pattern configurations continuously over multiple row traces but not extending between the finger regions.

 Patent Abstract

Capacitive multi-touch sensor panels in which both row and column traces may be formed on a single conducting surface are disclosed. These stack-ups may be made thinner and more flexible allowing them to be particularly well-suited for curved or other non-flat touch sensor panels, such as those that might be present on a mouse or other device designed to be grasped by a user’s hand. Curved sensor panel arrays that may be formed from flat substrates are also disclosed. These sensor panel configurations may include channels around the periphery of the array. These channels allow the flat array to lie flat when applied to a curved surface, such as the inside of the curved surface. The pattern of the touch sensor elements may be adjusted across the array to avoid the channels.

[0055] FIG. 4 illustrates an exemplary capacitive touch sensor panel 400 fabricated using a double-sided ITO (DITO) substrate 402 having column and row ITO traces 404 and 406, respectively, formed on either side of the substrate, and bonded between cover 408 and LCD 410 using transparent adhesive 412 according to embodiments of this invention. Substrate 402 can be formed from glass, plastic, hybrid glass/plastic materials, and the like. Cover 408 can be formed from glass, acrylic, sapphire, and the like. To connect to column and row traces 404 and 406, respectively, two flex circuit portions 414 can be bonded to directly opposing sides at the same edge of DITO 402, although other bonding locations may also be employed.

Computing System

Figure 4

by Matt Margolis

I’m a big believer that signs are everywhere if you just take notice.  The latest flurry of merchant price cuts for Apple’s current flagship phone the 5s is a sign that Apple’s iPhone 6 launch is just around the corner.

2013 iPhone 5 Price Cuts (Begin June 22nd followed by  a September 21st iPhone 5s Launch)

Last year iPhone carriers and distributors including,  AT&T, Walmart and Virgin Mobile began slashing prices of the iPhone 5 on  June 22.  Walmart cut their price to $129, Virgin Mobile $99 and AT&T for $99.99.  These companies typically slash the price of Apple’s latest and greatest iPhone to help liquidate their inventory ahead of Apple’s next generation iPhone release.  The Iphone 5s was launched 3 months after Walmart and others starting slashing their prices.

2014 iPhone 5s Price Cuts begin March & April followed by a June iPhone 6 Launch?

On March 5, 2014, Walmart became the first retailer to cut the cost of the iPhone 5s to $129.   Also in March, Bestbuy knocked down the price they sell the iPhone 5s to $149.   On April 18th, RadioShack announced that they would be selling the iPhone 5s for just $99 with a 2 year contract.

Conclusion

Price cutting of Apple’s previous flagship phone just months ahead of the next generation iPhone release is not something new.  The recent iPhone 5s price slashing may be another sign that clearly indicates the iPhone 6 is set to arrive in June.  In my previous review I examined the production ramp across Apple’s supply chain and my conclusion was that the production ramps were 2 to 3 months ahead of 2013 production ramps.  In 2013, Apple launched the iPhone 5s/5c in September but my review of the supply chain indicated that a June 2014 iPhone 6 launch appeared likely.

My check of the of iPhone merchant price cut activity also clearly indicate that the iPhone 6 is likely to launch in June 2014, nearly 3 months earlier than most analyst estimates.  My eyes are being drawn closer to Apple’s WWDC 2014 even being held in San Francisco on June 2nd, which may just include the introduction of Apple’s upcoming iPhone 6 alongside the iWatch.

 

 

 

 

 

 

by Matt Margolis

Bloggers and analysts seem focused on looking at Apple’s previous product release dates to determine the future release dates.  I personally believe that is not the best idea.  The answer to determining Apple’s 2014 product release dates might lie within the review of Apple’s supply chain.  Courtesy of SupplyChainOpz, I was able to get a hold of Apple’s supply chain processes based on a 2013 publication.  This data is now a year or two old but this simplistic view of Apple’s supply chain process still holds true today.

The Apple process diagram is below and I would describe this as a continuous process flow.  It has been speculated that Apple plans their product releases up to 4 years in advance of their release.  According to the Boston Herald Steve Jobs in 2011 left Apple 4 years worth of product blueprints for Apple’s upcoming products before his unfortunate death in October 2011.  The bottom line is Apple’s upcoming iPhone 6 product concept and design was determined years before Apple released the iPhone 5s last fall.

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Mac Manufacturing (Texas plant) – Apple was vocal about bringing back some of the Mac manufacturing from China back to the United states in December of 2012.  It took nearly six months for Apple to announce that they had selected a location and that they had decided to build a new Mac assembly plant in Texas.   The origin of Apple’s plans to open up a Mac manufacturing plant in the US was likely kicked around for months if not years prior to the announcement to the December 2012 announcement of their plan to bring back  Mac manufacturing from China.  On December 2013, Apple announced that they had begun taking orders and were manufacturing Mac’s in Texas.

It took Apple well over 6 months from the time of announcing their plan to the time to select a location for the facility.  You can guarantee that the discussions and plan to bring back manufacturing into the US had been kicked around months if not years earlier than the December 2012 news release.  The important message to takeaway from the Mac manufacturing plant is that it takes time to find a location that can compete on costs to run a plant as well as the availability of skilled workers necessary to manufacture the goods.  Another critical evaluation item is the cost of energy which directly correlate to the ability to use green energy including solar power to reduce the costs energy that is necessary to power a manufacturing facility.

Sapphire Cover Screens (Arizona plant) – Apple has been very secretive about the nature of the Apple sapphire plant since the very beginning.  Apple officially signed a confidentially agreement with a diversified technology company by the name of GT Advanced Technologies on August 24, 2012.  GT was previously known for being an equipment provider for the solar and sapphire LED market, but they have been trying to crack into the sapphire cover screen business for mobile phones and tablets for the past 2 years.  Apple is so secretive about the Mesa, AZ sapphire plant they created a new company named Platypus Development when they acquired the First Solar facility for $113.6m.  Apple reportedly is investing an additional $2B of capital expenditures for the sapphire manufacturing facility, which will produce an unprecedented amount of sapphire cover screens for various Apple devices.

On December 14, 2013 Meyer Burger was awarded a $80m order for diamond wire saw based cutting systems and replacement diamond materials.  The initial deliveries diamond wire saw based cutting systems were expected to begin in January and be completed before the end of June.  The replacement diamond materials were expected to be spread over all of 2014.  Meyer Burger has an existing partnership with GT Advanced Technologies and Meyer Burger has openly divulged to GT that they would are working on second-generation cutting techniques.

The only news that has been made public regarding the status of the Mesa sapphire plant were unearthed after digging through public records and job posting data, without this evidence Apple would have let all of us in the dark.  I tweeted the news of Apple’s plans to hire for positions related to the iPhone and iPod at the Mesa, AZ sapphire plant on January 13th.  On January 14th, 9to5Mac published a story detailing Apple’s hiring plans, specifically the recently posted manufacturing design engineer position for the iPhone/iPod at their Mesa, AZ location.   On January 29th, 9to5Mac brought to light “Project Cascade,” which indicating Apple’s aggressive plans to bring the sapphire plant live by February to manufacturer a new “critical” component.  A week later 9to5Mac broke news that Apple had procured enough furnaces to make 100 to 200 million sapphire iPhone displays in Arizona.  Over the past two weeks I’ve been able to retrieve additional documentation indicating that the plant went live with 140 tools (sapphire growth furnaces) on January 14th and further evidence that the sapphire plant had rapidly ramped up sapphire production by the middle of February.

Apple has been planning to introduce sapphire cover screens for quite sometime.  It took over a year to close on the First Solar manufacturing facility in Mesa, AZ after Apple signed their confidentially agreement with GT Advanced to provide sapphire cover screens for Apple’s devices.  Just weeks after GT and Apple signed their confidentiality agreement GT’s management abruptly announced that sapphire high volume, scalable, low-cost sapphire cover screen production is now available with the commercial availability of our technology during their Q3 2012 conference call with investors and analysts (full quote below).  This was a complete 180 degree change from any statement GT had made regarding the sapphire cover screen opportunity.  It was clear as far back as November 2012 that Apple had already tapped GT on the shoulder to deliver high volume and low-cost sapphire screens across Apple’s 2014 product line.  Recent reports have indicated that sapphire would only cover the high-end 5.5″ iPhone as well as the iWatch but the volume of sapphire that will be generated from this plant as urgency of Apple to bring this plant life just doesn’t support sapphire screens showing up on just higher end 5.5″ iPhone and the iWatch in 2014.  The sapphire project has been in the works for years and Apple’s sense of urgency, to bring the plant “live” and the around the clock work going on inside and outside of Mesa c facility to get it completed by June clearly indicate that Apple has much bigger plans for sapphire cover screens beyond 10 million iWatches in 2014 a few million high-end 5.5″ iPhone 6 phones.  I’ve said it before and I’ll say it again, GT could have supplied enough sapphire for the iWatch and the high-end 5.5″ iPhone 6 from their Salem, MA sapphire facility that measures only 25,000 square feet.   The Mesa sapphire plant will produce an unprecedented amount of sapphire screens in 2014 for use in Apple’s iDevices.

High-volume, scalable, low-cost sapphire production is now possible with the commercial availability of our technology, and breakthrough fabrication technologies have and will continue to drive out significant costs. (Seeking Alpha GTAT Q3 2012 Conference Call)

A8 Chips –  Apple just unveiled the 64-bit A7 processor just last fall during the iPhone 5s product release.  Less than 6 months later after the release of the iPhone 5s with A7 chips reports have surfaced that TSMC and Samsung will be providing the A8 chips for Apple’s upcoming iPhone 6 and iPads.  This report also notes that Apple appears to be pushing the industry suppliers to adopt 64-bit processors.  This is not the first time Apple was a trailblazer for new technology.  Apple was the first to introduce sapphire covered camera lenses when they rolled out the iPhone 5 in 2012, and in 2013 they introduced biometric fingerprint scanners made of sapphire, which covered the home button on the iPhone 5s.  Since 2012, other smartphone manufactures have tried to catch up to Apple’s standard and have followed suite with sapphire camera lens covers and biometric fingerprint scanners.    It should also be noted that Apple created a new electronic market for tablets when they introduced the iPad during the early part of 2010.

TSMC (Taiwan Semiconductor Manufacturing Company) announced in December 2013 that they would begin high volume production of the A8 chip next month (January 2014).  In January a report indicated that Amkor Technology, STATS ChipPAC and Advanced Semiconductor Engineering will handle the packaging of the A8 processor.  A report in March reconfirmed that TSMC that production of the A8 chip was already in high gear in January easing any concerns that there would be a A8 chip shortage in 2014.

iPhone 6 Touch Panel Displays – On April 1st Reuters reported that Japan Display Inc, Sharp Corp and South Korea’s LG Display Co Ltd have all been tapped to make the touch panel displays for the upcoming iPhone 6 for both the 4.7″ and 5.5″ models.  The report indicated that the 4.7″ touch panel display would be made first while the 5.5″ touch panel display could be delayed.  The report also indicated that both iPhone 6 screens are expected to use in-cell touch panel technology.  In cell touch panels are built into the screen which allows for thinner layers versus standard touch panel films.  The in-cell touch panel technology was introduced with the iPhone 5.  The Reuters report indicated that production of the iPhone 6 touch panel displays are expected to be ramped up by May. 

LPDDR4 DRAM memory – Micron’s Elpida is expected to provide their latest DRAM memory know as the DDR4.  Micron reported a $250 million dollar payment that was received from a customer for in advanced of product that is expected to be supplied through September 2016.  Micron’s Elpida has been a long-time supplier for Apple products.  Last September a teardown by Techinsights of Apple’s iPhone 5s and iPad Air revealed that Elpida’s DRAM Memory LPDDR3 memory was being used on the device.  Ifixit’s teardown of the MacBook Air in June also confirmed the use of Elpida’s DRAM Memory LPDDR3.  Precedent has been set and confirmed that Apple is using Elpida’s DRAM memory across their most recent products released in 2013 that continue to be produced in 2014.  Micron announced on April 2nd that they were ramping production of their next generation DDR4 module and is expecting shipments to begin during the quarter ending May 31st.

iPhone Battery – In March reports surfaced that Apple was looking to push out an automated production that would fully manufacture iPhone batteries.  Apple has already automated the Mac Pro and iMac production lines so this kind of news should not come as a major surprise given Apple’s push towards automation.  Within the last week pictures of reportedly of the iPhone 6 battery have surfaced online.  These photos could be clear evidence that Apple has indeed ramped up their battery production and has already moved over to automated production lines to produce the iPhone 6 batteries.

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iPhone Assemblers (Foxconn and Pegatron) – Various reports in March surfaced indicated that Pegatron, who was reportedly tapped to assemble iPhones and iPads, had opened up a new facility and was in the midst of hiring spree to fill imminent iPhone 6 orders.  It was also reported that Pegatron will begin assembly ramp of the iPhone 6 during Q2.

 

Look back to 2013

After examining the 2013 the reported production ramp ups ahead of the iPhone 5s and 5c launch last September it appears that Apple was able to go from production ramp to product launch in approximately 75 days.  However, as it is noted below Apple did run into a significant inventory shortage and PR nightmare after they sold out of iPhone 5s devices in just 24 hours after the product launched.  Apple did not specifically explain why there was a shortage of iPhone 5s inventory right after the product launched.  What is interesting is that reports surfaced 5 weeks after the iPhone 5s product launched that Foxconn had begun running its facility around the clock and employing more workers on its production lines.  Reading between the lines the issue may not been related to component shortage but a failure by Foxconn to exclusively meet Apple’s iPhone production needs on a timely basis. Key dates and links related to the 2013 iPhone 5s production ramp are listed below:

  • July 10, 2013 – It was reported that Foxconn was set to hire 90,000 workers in preparation for the iPhone 5s assembly ramp
  • July 18, 2013 – It was reported that integrated circuit (IC) orders were on the increase for the upcoming iPhone 5/s5c
  • September 1, 2013 – It was reported that iPhone 5s/5c touch panel display manufacturers (Japan Display and TDK) had recently ramped up production over the summer for the upcoming iPhone 5s/5c launch
  • September 20, 2013 – iPhone 5s and 5c launched
  • September 22, 2013 – iPhone 5s reportedly sold out until October
  • November 29, 2013 – It was reported that Foxconn (only assembler of iPhones in 2013) ramped up production capabilities to 500,000 devices per day in November 2013 to eliminate device shortages that occurred shortly after the iPhone 5s/5c went on sale in October 2013.

Conclusion

Apple experienced a iPhone shortage last September related to the iPhone 5s and it was an embarrassment for Apple and their assembly partner Foxconn.  Although it is unclear of where the problem resided within the supply chain (components or assembly), a report that surfaced in November indicated that Foxconn had increased their manufacturing capacity at their plant to 500,000 devices to resolve the iPhone 5s shortage.  A review of the 2013 iPhone 5s ramp news up indicated that Apple went from production ramp to production launch in approximately 60 to 75.  The bottleneck appeared to be related to Apple’s manufacturing partner Foxconn, which failed to ramp up its assembly capacity enough ahead of the iPhone 5s release in September 2013

Apple made a significant change in 2014 to their supply chain.  Apple has added Pegatron as a second assembly partner for the production of the iPhone and iPads.  Pegatron in March, was reported to be in the midst of a hiring spree of workers ahead of the assembly ramp up of the iPhone 6 at their new facility during Q2. The combination of Foxconn and Pegatron should enable Apple’s assembly partners to build close to 1,000,000 iPhones a day at maximum capacity. Adding Pegatron to the assembly mix could lower the lead time to assembly Apple devices from 60 to 75 days that they experienced in 2013 to as low as 30 to 38 days for the iPhone 6 assembly.

Apple has also purchased and is currently delivering phases of their new sapphire manufacturing facility to their new component manufacturer GT Advanced Technology.  The sapphire plant went live in January 2014 producing sapphire boules and has since ramped up its production significantly by mid February.  TSMC began ramping up production of their A8 chip in January 2014 and confirmed in March 2014 that they are still on schedule.  Japan Display Inc, Sharp Corp and South Korea’s LG Display Co Ltd, which are believed to be touch panel display suppliers of the iPhone 6 phones, are expected to ramp up production of displays by May 2014.  Micron’s Elpida is expected to be the DRAM supplier for Apple’s upcoming iPhone 6 has indicated that they are ramping production of the DDR4 module on April 2nd.  Micron announced during their most recent quarterly conference call that they expect shipments of the DDR4 modules to begin in the quarter ending May 31st.  In March reports surfaced that Apple was looking to automate the battery line for the iPhone 6 and within the past week photos have surfaced that might indicate the iPhone 6 batteries are already being mass-produced.

Apple’s key component makers all appear to be currently ramped up or will be ramping up production by May, which is only a few weeks away.  At the 5,000 foot level Apple is 2 to months ahead of their 2013 production pace, which leaves the door open for a summer release of the iPhone 6. Based on my review of the supply chain I don’t see any reason why Apple can’t and won’t launch at least one of the iPhone 6 models in time for your 4th of July celebration.  Apple’s WWDC begins on June 2 in San Francisco and I believe this would be the perfect stage to introduce; the beauty, the thinness, the speed, the battery life, the increased size and the durability of the iPhone 6 for all to enjoy.

 

 

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

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?

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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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