Posts Tagged ‘GT Advanced Technologies’

Summary

GT’s ultrathin sapphire cover plate composites offer a superior alternative compared to the current available mobile device cover screens and point-of-sale scanners.

GT’s sapphire cover screens will provide Apple users with a significant improvement in accuracy, sensitivity and reduce the power consumption of the touch sensor.

GT’s exclusivity with Apple does not prevent GT from providing sapphire composite cover screens within the consumer electronic industry including the likes of Samsung and LG.

GT Advanced Technologies (GTAT) acquired Twin Creeks Technologies on November 14, 2012. GT’s purchase of Twin Creeks was primarily focused on Hyperion, an ion implanter technology that enables the production of lower cost thin substrates with minimal material (kerf) loss. Hyperion was primarily developed to cut the cost of solar cells in half, but GT saw Hyperion as a technology that could be used for several applications and industries, including sapphire, silicon, SiC (silicon carbide) to support consumer electronics, solar, and power electronic markets. GT’s press release in 2012 indicated that they expected to “pursue the development of thin sapphire laminates for use in applications such as cover and touch screen devices.” The Hyperion ion implanter and its patented technology have the potential to minimize, or, in some cases, eliminate, the need for wafering saws, which could significantly lower the cost of producing sapphire laminates, otherwise known as ultrathin layers of sapphire.

GT’s most recent patent application, which was published on May 15, 2014, provides evidence that GT is now capable of producing thin sapphire laminates for use in mobile electronic devices. The patent defines mobile electronic devices as “media players, mobile telephones (cell phones), personal data assistants (PDAs), pagers, and laptop computers and notebooks.” The patent also exposes some new benefits of sapphire laminates that may not be widely known, including improving the signal strength of the touchscreen sensor relative to a standard touchscreen device, allowing improved sensitivity and accuracy, and/or reducing the power consumption in the touch sensor. A sapphire cover plate can be affixed to nearly any type of surface, including rigid or flexible surfaces, as well as flat or curved surfaces. Additionally, a sapphire cover plate can be positioned on top of a display and be sold as an after-market sapphire laminate screen protector, which can be removed later if desired. GT’s sapphire cover plates can be produced in three distinct composite forms: free-standing sapphire multilayer composite, multilayer sapphire-glass composite and multilayer sapphire-polymeric material composite.

GT’s sapphire laminates composite solutions will also create new market opportunities outside of mobile devices including the point-of-sale scanner market. One of the largest barriers to entry has been the price of a pure sapphire as well as the availability of sapphire material. GT’s sapphire laminate composite solutions can be created as a price point that is very competitive to today’s solutions and offer additional benefits that make them the superior option of choice by big box retailers and grocery stores around the globe. Additionally, GT’s ability to exfoliate sapphire laminates into layers that are less than 15 microns thick will significantly increase the number of units produced from a sapphire boule compared to the pure sapphire cover screens that are currently being made for Apple’s iPhone 6.

The “Problem” With Today’s Cover

GT’s patent also outlines the shortcomings of today’s cover-screen options. One of the main issues facing today’s cover screens is damage by “abrasions that scratch and pit the physical user interface, and these imperfections can act as stress concentration sites, making the screen and/or underlying components more susceptible to fracture in the event of mechanical or physical shock. Additionally, oil from the user’s skin or other debris can coat the surface and may further facilitate the degradation of the device. Such abrasion and chemical action can cause a reduction in the visual clarity of the underlying electronic display components, thus potentially impeding the use and enjoyment of the device and limiting its lifetime.”

One way to improve cover-screen durability is by using “polymeric coatings or layers that can be applied to the touchscreen surface in order to provide a barrier against degradation. However, such layers can interfere with the visual clarity of the underlying electronic display as well as interfere with the touchscreen sensitivity. Furthermore, as the coating materials are often also soft, they can themselves become easily damaged, requiring periodic replacement or limiting the lifetime of the device.”

Another common cover screen option uses a “layer of chemically-strengthened alkali aluminosilicate glass, with potassium ions replacing sodium ions for enhanced hardness, such as the material referred to as ‘gorilla glass’ available from Corning. However, even this type of glass can be scratched by many harder materials and further, as a glass, is prone to brittle failure or shattering.”

GT believes that “while materials are available which can enable the display of a mobile electronic device to be relatively resistant to damage, there remains a need in the industry for materials and methods for providing improved mechanical toughness and scratch resistance without reducing transmittance.”

A “Super Super Thin” and Tough Sapphire Cover Plate

Through the use of GT’s patented Hyperion technology, specifically, Hyperion’s ion implantation/exfoliation method, GT was able to produce an ultrathin sapphire layer, or lamina. The ultrathin sapphire layers are expected to have a thickness of less than 50 microns or even less than 15 microns. Keep in mind that 15 microns thick would be nearly 1/12th the thickness of the sapphire home button on Apple’s iPhone 5s, which measures 170 microns thick. GT’s sapphire cover plates can be produced in three distinct forms: free-standing sapphire multilayer composite, multilayer sapphire-glass composite, and a multilayer sapphire-polymeric material composite.

GT’s sapphire cover plate can be in the form of a free-standing sapphire multilayer composite that is composed of sapphire layers only. This form of sapphire cover plates can have a thickness of less than 5 mm or even just 3 mm, depending on the size of the display region, as well as on the size and shape of the display surface on the device. A free-standing sapphire multilayer composite cover plate would be composed of between 2 and 10 layers of sapphire, with each layer having a thickness of less than 50 microns.

GT’s sapphire cover plate can be in the form of a multilayer sapphire-glass composite that is formed by attaching a sapphire layer to the front and back of a transparent glass subsurface layer. The subsurface glass layer could be made from various types of glass, including soda-lime, borosilicate, or aluminosilicate glass, which also includes chemically strengthened alkali aluminosilicate glass (“gorilla glass”) (GLW). The mutlilayer composite sapphire cover plate would retain the surface characteristics of sapphire, including hardness and scratch resistance. The subsurface layers that work with the multilayer composite sapphire cover plate are expected to have a thickness of between 0.2 and 1.0 mm. A sapphire-glass composite structure will result in enhanced shatter and scratch resistance by the addition of sapphire layers.

GT’s sapphire cover plate can be in the form of a multilayer sapphire-polymeric composite composed of polycarbonate or polymethacrylate. The multilayer composite sapphire cover plate would retain the surface characteristics of sapphire, including hardness and scratch resistance. A sapphire-polymeric material composite will result in improved resistance to mechanical damage, including cracking, if the material is flexed or bent to fit a curved surface.

Capacitive Touchscreens and Transparent Conducting Oxide (TCO)

I’m sure you have tried to touch your cell phone while wearing gloves and realized that your phone does not respond. The reason for this is because the touchscreen on your mobile device is a capacitive touchscreen, and the human body is actually an electrical conductor. When your finger touches the surface of your smartphone screen, it results in a distortion of the screen’s electrostatic field, measurable as a change in capacitance. Apple (AAPL) adopted “in-cell” technology in 2012, which eliminates a layer of capacitors and builds them inside the display. Additional benefits of “in cell” technology include thinner devices, improved display clarity due to fewer layers, and improved touch response.

Sapphire is a very unique material that is currently known for its toughness and scratch resistance. One additional advantage that is also fairly well known is that sapphire has dielectric properties; what is not widely known, however, is that these dielectric properties of sapphire can significantly improve a user’s experience with the touchscreen of a mobile electronic device. Apple’s adoption of the “in-cell” technology in 2012 allowed it to remove one layer from the display, and thus also one step in the assembly, of the iPhone 5, which provided significant user-experience improvements such as those mentioned above. Typically, a capacitive touchscreen structure consists of two layers of transparent conducting oxide , often separated by a dielectric layer. GT’s patent would enable the TCO/thin dielectric/TCO structure to be moved to the front of the subsurface layer and be covered by a sapphire layer. A sapphire layer covering a TCO layer on top of a transparent subsurface layer would offer an increase in signal strength for the touch sensor, as well as provide a simpler fabrication process, since there is no need for a deposited dielectric layer. Additionally, this modification would also increase the signal strength of the touchscreen sensor relative to a standard touchscreen device, allowing improved sensitivity, accuracy, and/or reduced power consumption in the touch sensor.

Apple is focused on the durability of its screen as well as the overall user experience. Apple’s partnership with GT Advanced sapphire solutions will not only increase the durability of its devices but also enhance the user experience. Sapphire is not only an optically pure solution compared to the current cover screen materials available, but it also allows the device to be thinner by substituting a thicker substrate layer with an ultrathin layer of sapphire. The advent of sapphire Apple’s device assembly will result in a significantly better touch screen as well as reducing the power consumption in the touch sensor itself.

Sapphire Laminate Solutions are “Not Covered” by GT’s Exclusivity with Apple

During GT’s Q1 2014 conference call, Pacific Crest Securities analyst Weston Twigg asked GTAT’s CEO Tom Gutierrez a few questions that made it a bit more clear as to what is “covered” in GT’s exclusivity with Apple and what is “not covered”.:

Weston Twigg: Do you have the same exclusivity restrictions around sapphire related to your Hyperion technology that you would on the ASF technology?

Tom Gutierrez: We do not. But I mean, I would be insane not to offer it to my existing customers.

Weston Twigg: Okay, but would the sapphire itself have the same restrictions if you treat it downstream coming out of a furnace?

Tom Guiterrez: No. I don’t have those restrictions with respect to Hyperion sapphire.

Additionally, GTAT’s CEO also made some interesting comments on the various sapphire applications as well as how “very, very optimistic” he is to deploy sapphire in various forms and applications outside of Apple.

There are applications where due to the size or other constraints and alternative solution might be useful. Therefore, our objective is to have a range of solutions that start from inexpensive scratch only production, all the way up through full properties, both sapphire being available to the user. In addition, I see coatings at one extreme. I see glass sapphire composites at another point in the continuum. I see plastics in there as part of the continuum. Then ultimately, the pinnacle of the best of the best is pure sapphire.

I’m also very, very optimistic about our efforts to deploy sapphire in many different forms and to take advantage of what we think is the bulk materials key characteristics in a variety of different applications.

-Tom Guiterrez (Seeking Alpha GTAT 2014 Q1 Transcript)

GT’s Sapphire Laminate Solutions: Benefits and Target Market

GTAT’s ultrathin sapphire layers will allow for fabrication improvements of the capacitive touchscreen, especially for devices that adopt “in-cell” display technology, e.g., Apple. The fabrication improvements that are enabled by the use of ultrathin sapphire layers will result in an increase the signal strength of the touch screen sensor relative to a standard touch screen device, allowing improved sensitivity, accuracy, and/or reduced power consumption in the touch sensor.

GTAT’s ultrathin sapphire cover plates are extremely versatile and can be comprised of a free-standing, sapphire multilayer composite; a multilayer sapphire-glass composite; or a multilayer sapphire-polymeric material composite.

GTAT’s sapphire cover plates offer a low-cost, enhanced shatter and scratch-resistance alternative versus the current glass-based cover screens available for mobile devices.

GTAT’s sapphire cover plates offer low-cost, improved resistance to mechanical damage, including cracking, if the material is flexed or bent to fit a curved surface versus the current polymeric-based cover screens available for mobile devices.

GTAT’s targeted mobile device market includes: media players, mobile telephones (cell phones), personal data assistants (PDAs), pagers, and laptop computers and notebooks. In other words, GT is not just focused on smartphones but the entire market of mobile devices, including wearable devices.

Hyperion, GTAT’s technology that enabled it to develop sapphire laminates for mobile devices, is not covered by the exclusivity agreement between GTAT and Apple.

Conclusion

GTAT entered the point-of-sale market in the spring of 2013 when it introduced the use of sapphire glass on Motorola’s MP6000 scanner. In the fall of 2013, GTAT entered into a long-term sapphire supply agreement with Apple that will allow GT to experience economies of scale to significantly reduce the cost of producing sapphire. Last week, GT applied for an ultrathin sapphire cover plate patent that will significantly reduce the costs of producing sapphire laminates that can be used across mobile devices as well as the point-of-sale market. A very large global retailer has been interested in adopting sapphire glass point-of-sale technology for over three years! GT’s ability to deliver ultrathin sapphire cover plates at a price that is equal to less durable and more scratch-prone materials will lead to a new wave of sapphire scanner adoption by the point-of-sale market. I was asked before by one of my readers, “What limits do you see for sapphire laminate applications?” My answer was there are no limits! Sapphire laminates will begin to replace glass everywhere you look, one pane at a time, one mobile device at a time, and one point-of-sale scanner at time; and GT Advanced Technologies will be leading the industry charge for years to come.

My detailed analysis focuses on where GT has come from as well as where the company is headed. Just as the name indicates, GT Advanced Technologies is a technology company and in my opinion the stock price at these levels provide one of the best technology values of our lifetime at around $15 per share. Once the Wall Street analysts see the forest through the trees they will begin to pile on revenue and EPS on top of their 2014, 2015 and 2016 estimates. GT’s sapphire materials business will Apple provide a solid and reoccurring base of revenue and EPS that should approach $2 billion and $2.00 EPS by 2015. In 2015, GT will see a revival of the solar marketplace including polysilicon production equipment, HiCz and DSS sales, and GT’s commercialization of its Merlin solar modules as well as increased demand for GT’s 165kg sapphire growth furnaces. In 2016, GT will see increased market adoption of its Merlin solar modules and Hyperion Technology as well as continuation of the capital expansion growth cycle of the solar industry that is expected to being by early 2015.

I’ll be the first to admit that I have the highest revenue and EPS estimates on the street for GTAT for 2014, 2015 and 2016. I’d also like to admit that my estimates do include several new products that will be coming online in 2015 and gaining market share into 2016 including GT’s triple junction solar cells for mobile devices, GT’s sapphire composite solutions for mobile devices and point-of-sale markets and GT’s ability to supply sapphire for Apple’s eventual switch over to LED displays, which is only a matter a time after the company’s purchase of LuxVue.

I currently have a fair value of $87.50 on shares of GTAT, which represents a 17x my 16′ EPS estimate of $5.26 on $4.736B of sales and 31x my 15′ EPS estimate of $2.84 on $3.177B of sales.

We released this article to paid subscribers of PTT Research and pre-registrants on May 19th of my upcoming PTT Research Forensics newsletter that will launch on June 2nd, 2014.

Full Disclosure: I am long GTAT

Advertisements

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

I can’t believe it’s already time for GTAT to report its quarterly results for Q1 2014.  I decided to look back at my Top 10 predictions I made nearly 3 months ago ahead of GT’s Q4 2013 earnings report.   Let’s see how my predictions stacked up!

 

#1 Updated 2014 revenue guidance and initial EPS guidance –  GT confirmed the $600-800m range on January 16, 2014 after Richard Gaynor (former CFO) announced his resignation.  From my own experience having an additional month of knowledge can change estimates significantly.  With that said, given Apple’s “cone of silence”  I do not expect GT’s management to up the 2014 revenue forecast unless they landed a sizable new contract outside of Apple that will hit in 2014 or a significant order will be recognized as revenue from their current backlog.  Assuming revenue guidance for 2014 will not be updated,  I’m expecting GT to guide 2014 earnings at a profit of $0.12 to $0.38 per share.  For comparison the Yahoo Finance Analyst average estimate for 2014 is $0.09 per share profit.  If management ups guidance above $800m, you can tack on $0.13 EPS per $100m of revenue to the top and bottom range of my estimate for 2014.

Update 5/2/14: GT guided 2014 revenue at $600-800m versus my expectation of $600-800m.  GT guided 2014 EPS at $0.02 to $0.18  versus my range of $0.12 to $0.38.  

#2 Apple Sapphire Contract –  GT should give investors a general update regarding the tracking of the project against contractual terms.  It is highly unlikely that management will give any information related to project dates or reference sapphire cover displays.  I’m going to keep a close eye to see if GT reports or is asked about their current employee headcount, which is expected to grow substantially in Mesa, AZ.

Update 5/2/14: GT confirmed Mesa sapphire plant is on track.  GT confirmed they will be over 1,000 employees by midyear with growth occurring in the US.  GT’s headcount as of 12/31/13 was 541.  Distribution of employees by location is below:

Update 5/3/14

As of December 31, 2013, 185 employees were located at our Merrimack and Nashua, New Hampshire facilities, 76 employees were located at our Salem, Massachusetts facility, 19 employees were located at our Danvers, Massachusetts facility, 43 employees were located at our Missoula, Montana facility, 11 employees were located at our San Jose, California facility, 35 employees were located in our Mesa, Arizona facility, 60 employees were located in our Santa Rosa, California facility, 33 employees were locatedat our Hong Kong facility, 9 employees were located at our Taiwan facility, and 70 employees were located at our Shanghai facility.

 

#3 Q1 2014 EPS and Revenue Guidance –  I expect the company to guide Q1 revenue at $60m and a loss of $0.15 per share.  For the comparison the Yahoo Finance Analyst revenue range is $55m to $175m for Q1 with an average estimated loss of $0.08 per share.  I personally don’t expect any meaningful sapphire revenue from Apple to hit the books until late Q2 at the earliest unless Apple surprises everyone with a iphone June release.

Update 5/2/14: GT guided Q1 2014 revenue of $20-30m  and guided Q1 EPS loss of $0.20 to $0.25 versus my expectation of $60m and a loss of $0.15.

 

#4 LED –  GT should give an update on the availability of their ASF capacity, industry utilization rates as well as pricing trends.  Last quarter GT reported that ASF capacity would be limited in the near term due GT’s dedication of a vast majority of their current ASF capacity to support Apple.  Sapphire equipment utilization rates were high and that  sapphire pricing showed improvement driven by LED and mobile lenses and other mobile device applications.

Update 5/2/14: GT indicated that they are seeing improved pricing in the end market and that its ASF customers continue to operate at a high utilization rate

#5 Polysilicon – Last quarter GT stated that their pipeline in the Middle East continues to develop while prices and demand are coming into balance.  GT should give an update on OCI, who appears ready to begin the next build out of their plant by 2H 2014.

Update 5/2/14: GT  continued to be bullish on its long-term opportunities in the Middle east and indicated that Polysilicon prices appear to have bottomed out.  On 3/11/14 GT announced a $336m Polysilicon contract with Cosmos in Malaysia.

#6 Hyperion – Based on the last conference call (see comments below) it appears GT is close to landing a few deals related to the Hyperion.  GT appears to be near a deal related to solar cells with an Asian manufacturer as well as a new deal related to composite glass and thin sapphire structures for consumer applications.

Update 5/2/14:  On 4/29/14 GT announced various Hyperion initiatives  including a producing composite glass versus my expectation that a “deal” was near as of 2/24/14.  Chalk one up for the Obscure Analyst!

#7 HVPE – Last quarter GT was expecting to commercialize their HVPE for LED by the of 2014 (see below).  Just last week GT announced they had acquired exclusive rights to Kyma Technologies’ PVDNC technology, which will be compliment with GT’s HVPE system.  GT should be giving investors more information regarding the commercial availability and revenue expectations for HVPE.

Update 5/2/14: GT provided update during its March Technology conference.  This opportunity may contribute up to $100m a year by 2016.

#8 2014 Expenses – Keep an eye on overall operating expense including expenses related to the support of new technology development ($16m was set aside in 2013 for new technology including Hyperion, Silicon Carbide and HVPE Gan systems).  Capital expenditures for 2014 will also be closely scrutinized, it’s clear there has been some heavy lifting of capital equipment inside Mesa, but how much if any of it will be funded by GT?  Also, it will be interesting to see if the R&D forecast for 2014 will slow down from Q4 spending.  A slow down may shed some light on how far along GT is with the advancement of their ASF platform, which directly impacts the sapphire yield for Apple and pace of expansion of sapphire for LED, industrial and specialty sapphire businesses.  Management guided Op Ex at $54 million to $59m in Q4 which included $27 million to $32m of R&D expenses to focus on accelerating the development of their ASF platform.  (Final 2013 Op Ex guidance is below)

Update 5/2/14: No mention of GT’s R&D Spend in 2014  GT guided Capital spend at $500

#9 A “BIG” sapphire acquisition before the earnings call – I do expect GT to acquire another large player to expand sapphire for LED, industrial and specialty sapphire businesses.  I believe the fund-raising completed in December will be used to acquire a significant player related to sapphire equipment or materials, the only question that remains is how soon?

Update 5/2/14: No acquisition

#10  A “BIG” contract announcement before the earnings call –  The other type of “BIG” announcement we could hear before the earnings call tomorrow is a large contract.  GT’s CEO told investors last May, that GT will be moving “more and more towards a book-and-ship model,” my interpretation of this comment is GT is working towards less dependency on equipment business and managing backlog to a business model that leans heavily towards reoccurring revenue streams, similar to the sapphire materials contract GT signed with Apple in November.  It is also clear from the Apple deal that GT can run the equipment they sell like nobody else since Apple is handing the keys over to run and design the sapphire plant in Mesa, AZ.  The business model shift towards more materials business and less equipment dependency would also support GT’s focus on diversification.  Diversification could be defined as a shift between different lines of business or a shift of revenue sources within a line of business.   My complete list of potential near-term “BIG” deals is below complete with management’s comments,

Expanding Sapphire (1)In support of the new materials business, we have accelerated the development of our next-generation launch capacity, low-cost ASF furnaces. Not only will these efforts support our initiative with Apple, we expect that it will enable the expansion of our LED, industrial and specialty sapphire businesses, positioning GT and its equipment customers as the industry’s lowest-cost sapphire producers. We’re very excited about the opportunities that lie ahead for our sapphire business”.

Update 5/2/14:  On 4/29/14 GT announced various Hyperion initiatives  including bonding of sapphire on glass, silicon and plastics.  Sapphire laminate on composite glass and sapphire coating.  Chalk one up for the Obscure Analyst!

Hyperion Solar Cells (1) “We have made significant progress producing ultrathin silicon wafers with this technology, and are working to develop applications for the solar industry with a well-known solar cell manufacturer in Asia.”

Hyperion Consumer Applications (1) “We have also made similar progress developing low-cost composite glass and thin sapphire structures that we believe will have broad use in consumer applications”.

On 4/29/14 GT announced various Hyperion initiatives  including a producing composite glass.  Chalk one up for the Obscure Analyst!

Polysilicon in the Middle East (1) “With respect to our polysilicon business, we continue to be optimistic about our long-term opportunities as our pipeline in the Middle East continues to develop, supply and demand are coming into balance and pricing appears to have bottomed out, with an expectation that it will begin to rise over the next 6 to 9 months”. 

Update 5/2/14:  On 3/11/14 GT announced a $336m Middle East Polysilicon contract with Cosmos in Malaysia.  Chalk one up for the Obscure Analyst!

HiCz N-type Silicon Wafers for PV (1) “We also continue to advance the technical development of our HiCz n-type material solution. We recently demonstrated HiCz’s unique capability to grow high-quality, 10-meter long ingots, which is 3x to 4X the length that can be grown in a typical batch Czrochralski process. We will continue to optimize tool performance in preparation for bringing HiCz to market late in the second half of 2014. We believe that early traction for this product will come from outside of China”.

Silicon Carbide High Frequency High Power Devices  (1) “We’re currently seeking strategic partners to support our silicon carbide development. Given the high cost of silicon carbide wafers, the real opportunity for silicon carbide remains in pairing it with Hyperion, which should enable thin wafer cost structures that are nearly an order of magnitude below today’s state-of-the-art wafering processes. Such an advance would significantly expand this opportunity for GT”.

Update 5/2/14:  On 4/29/14 GT announced various Hyperion initiatives  including bonding of SiC (Silicon Carbide) on glass, silicon and plastics.  Chalk one up for the Obscure Analyst!

Update 5/2/14:  On 4/7/14 GT announced a $58.6m order for specialty furnaces, which will likely be used to form Silicon Carbide products.  Chalk one up for the Obscure Analyst!

Conclusion

The events that transpired over the last 3 months since the Q4 2013 conference call fell largely in line with what I was expecting, including my list of potential “BIG” near term that materialized.  I am working on my calibrating my expectations for the next 3 months and sharing it with all of you prior to next week’s earnings announcement and conference call.  I know the ride has been bumpy over the last several weeks for GTAT longs but I assure you, we haven’t seen nothing yet!  Buckle up, grab a helmet and get prepared for the ride of your life on the GT Choo Choo chain. 

 

I am long GTAT and will be buying more shares with the monthly proceeds generated from the Obscure Analyst blog for the foreseeable future.

 

by Matt Margolis

Analyst Stephen Chin from UBS, indicated in his April 29th report that his checks indicated that GTAT shipped out approximately 2,200kg of sapphire ingots to China to be processes into sapphire screens.  GT is currently recruiting for Inventory Control Analysts as evidenced by the company’s April 24, 2014 job posting on the company website.  Inventory control analysts typically monitor inventory (in this case sapphire) to ensure that levels of inventory are adequate as well as to monitor sale orders and overall production.  I spent some time in one of my previous “full-time” jobs, doing inventory audits and visiting various manufacturing locations.  It is very important to tag, monitor and count inventory levels.  Additionally, since GT is growing and accumulating massive amounts of sapphire inventory it is critical to understand expected deliveries as well as logistics.  Just like the UPS commercial, “What can brown do for you,? knowing your logistics is very important since Apple operates a just in time assembly process.  Apple’s just in time assembly process keeps carrying costs low and does not tie its precious cash by holding large amounts of inventory.

One interesting bullet point within the key duties and responsibilities section is the mention of “releasing and logging new part number releases”.  The key duties and responsibilities seem to indicate that GT will be producing multiple part numbers i.e. variations of cored sapphire inside the Mesa, AZ sapphire plant.  If GT is indeed coring ingots and shipping to China for processing this bullet point would likely indicate that GT is making sapphire for not just one Apple device but multiple Apple devices.  Any thoughts I have related to GT producing sapphire for multiple devices always forces me to revisit the 9 phases (sections) of the Mesa, AZ sapphire plant.  Is each phase in the Mesa sapphire facility dedicated to the production of sapphire for a specific Apple device?  What I can tell you is that Module 1 through Module 4 have been delivered to GT for possession based on my review of the issued permits and descriptions.

 

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

 

Inventory Control Analysts Key Duties and Responsibilities

  •  A dynamic individual that can interact with Engineering, Logistics, and Operations to ensure that the inventory counts and numbers are up-to-date and accurate to the best of their ability.
  • Maintain orders and inventory in SAP in a timely and efficient manner.
  • Maintain and distribute a real time order report.  Track inventory orders and report to management.
  • Modify as necessary.
  • Work with Operations Analyst to identify BOM changes and SAP part number changes that directly affect open and pending sales orders that directly affect inventory.
  • Work with Operations order team for releasing and logging new part number releases for engineering and operations in SAP.
  • May interact with Finance and Logistics to provide customer specific product information on Inventory related issues.

                         Inventory Control Analysts Required Skills

  • Excellent organizational skills and attention to detail. High level of accuracy is required.
  • Working knowledge of capital equipment production.  Strong familiarity with the sales order process in a production environment.  Clear understanding of part numbering systems, bills of materials, revision control, engineering interface and Logistics.
  • Competent user of SAP with strengths in order entry and sales order process.
  • Clear communicator that can address all management levels of the organization.
  • Strong computer skills capable of producing Excel spread sheets and reports that may be distributed widely.   Able to generate reports directly out of SAP.

· UBS checks indicate that GT shipped some small quantities of sapphire made in its Arizona fab to one of Apple’s partners in China who is in charge of making sapphire covers.

· Given the early success of starting shipments of small amounts of sapphire to China last month, UBS expects GT could raise its full year 2014 sales guidance to the upper end of its $600M-$800M range, with 80%+ still likely from sales of sapphire materials.

· UBS expects 4th and final prepayment will be made in May

· UBS is estimating 100 furnaces were turned on and running. They expect 400-500 sapphire furnaces to be turned on in 1Q14 and 900-1000 in 2Q14

· Sapphire cover screens margins expected to be around 25%

If you follow the Obscure Analyst, you would already know GT turned on 140 furnaces on January 10th, 2014 and UBS checks indicate that the “Quick Start 140” furnaces made their first delivery of sapphire ingot in to one of Apple’s partners in China who will make the sapphire covers. A sapphire ingot is a sapphire that is “cored” out of the boule that will need to be sliced into sapphire screens. UBS indicated that 2,200 kg of sapphire ingots were shipped to China for processing. I am estimating that approximately 100,000 to 115,000 sapphire screens could be produced from 2,200 kg of sapphire ingots. GT’s selling price per screen based on the information provided is falling into the range of $8.50 to $10 per screen.

I am slightly more optimistic than UBS as far as the sapphire furnace ramp up due to the fact that over 1,200 furnaces have been imported and delivered prior to the Mesa, AZ plant prior to March 3rd, 2014. Additionally, my 1,200 furnace count does not include any furnaces from GT that were taken out of equipment inventory in Q4 ($71m worth), or $180m worth of PP&E that was deployed in Q4 2013 (mostly in AZ). I believe that nearly all of the furnaces were ramped up by the end of March based on GT’s ability to ramp over 500 furnaces a month and given that fact that most of the furnaces were delivered between December and February.

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

by Matt Margolis

GT Advanced Technologies posted a SAP Functional Lead position on April 10th, 2014 to support its Mesa, AZ sapphire operations.  This position is heavy into SAP (financial system) with experience in materials, production planning, sales and distribution, financial transactions and monitoring operations.  This position also requires “experience with a company experiencing rapid growth”.

The key takeaway here is GT is preparing for a significant pickup in the shipment of sapphire materials and this role is critical to managing a financial transaction that begins with the flow of materials, finished goods, sales, billing and cash receipts.   Additionally, GT is expecting to experience rapid growth of its sapphire operations in AZ, which is a signal that Apple has big plans for GT and sapphire for the foreseeable future.

SAP Materials ManagementSAP MM module as the term suggests manages materials required, processed and produced in enterprises. Different types of procurement processes are managed with this system. Some of the popular sub-components in SAP MM module are vendor master data, consumption based planning, purchasing, inventory management, invoice verification and so on.

SAP Production PlanningSAP PP module is another important module that includes software designed specifically for production planning and management. This module also consists of master data, system configuration and transactions in order to accomplish plan procedure for production. SAP PP module collaborate with master data, sales and operations planning, distribution resource planning, material requirements planning, Kanban, product cost planning and so on while working towards production management in enterprises.

SAP Sales and DistributionSAP SD modules deal in managing all transactions ranging from inquiries, proposals, quotations and pricing and more. The sales and distribution module helps greatly in inventory control and management. SAP SD module consists of master data, system configuration and transactions.  Some of the sub-components of SAP SD module are: master data, sales support, sales, shipping and transportation, billing, credit management, sales information system and so on.

SAP Financial Accounting – SAP FI module deals in managing financial transactions within enterprises. This financial accounting module helps employees to manage data involved in any financial and business transactions in a unified system. This module functions very well for reporting requirements. The SAP FI module is very flexible and is functions well in any type of economic situation. Be it a smaller organization or a larger organization, SAP implementation helps in consolidating data for diverse business transactions and legal requirements. Financial Accounting module helps one to get real-time financial position of an enterprise in the market.

SAP ControllingSAP CO module is another important SAP modules offered to enterprises. The controlling module supports in the process works of planning, reporting and monitoring operations of businesses. It involves methods to view and organize costs that are required for financial reporting. Controlling module enables one to plan, track, perform and report about costs. Controlling includes managing and configuring master data that covers cost elements, cost centers, profit centers, internal orders, and functional area and so on.

SAP Quality Management – SAP QM module helps in management of quality in productions across processes in an organization. This quality management module helps an organization to accelerate their business by adopting a structured and functional way of managing quality in different processes. SAP QM module collaborates in procurement and sales, production, planning, inspection, notification, control, audit management and so on.

Position Summary

GT Advanced Technologies is seeking an experienced and highly motivated SAP Functional Lead with experience with Materials Management to work in the Information Group as a systems support and integrator for an SAP ECC 6.0 installation in our manufacturing operations.  The primary responsibility will to provide SAP Functional Support across the entire areas of our SAP installation with a focus on MM and PP but also SD and FI/CO to a lesser extent. This individual will work as a local liaison to a remote Information Technology team and third party implementation and functional support partner to facilitate the development and management of systems with respect to the SAP ERP/MRP environment.

Required Experience

  • Minimum of 5 years of progressive experience implementing and support SAP Materials Management module, including supply agreements, procurement, inventory management, and receiving in a complex manufacturing environment.  Experience with SAP Fi/Co, PP, QM and SD modules desirable. Experience interfacing SAP with a SAP MES system a plus.
  • Experience working with a Company experiencing rapid growth.
  • High level of integrity and dependability with a strong sense of urgency and results orientation.
  • Strong verbal and written communication, facilitation, and interpersonal skills.
  • Public Company and Sarbanes Oxley experience required.
  • Requires a bachelor’s degree in Computer Science or Business Administration
  • Travel 10% of the time, more as needed

Also, if you haven’t seen a GT job posting it is important to read GT’s core mission statements.  GT is driven by,  “elevating advanced materials and equipment performance to increase capacity, quality and throughput by lowering operating costs”  Additionally, “we have a successful track record of commercializing crystallization growth systems on a global scale to accelerate the ramp of our customers plants to volume production and have decades of experience as an advanced materials provider”.  It is clear that lowering costs, increasing throughput, accelerating plants to volume production and providing material is what GT is good at.

 

Expertise

Our expertise is in crystalline growth technology, process engineering and manufacturing operations. Our world-class team of scientists and engineers has deep-domain experience in elevating advanced materials and equipment performance to increase capacity, quality and throughput while lowering operating costs. We have a successful track record of commercializing crystallization growth systems on a global scale to accelerate the ramp of our customers’ plants to volume production and have decades of experience as an advanced materials supplier.

Excellence

From purchase to product lifecycle support, our operational excellence and service sophistication is unmatched. This means we can respond quickly and efficiently to customers so they can meet their business requirements with confidence and support them as their businesses grow.

 

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

by Matt Margolis

I reached to for GTAT for comment and the company representative declined to discuss who GT works with on its technology development programs.

Background

GT Advanced Technologies (GTAT) mentioned during the Q4 2013 prepared remarks that its Merlin technology, “comes out of a research operation we established in the Bay Area, over a year ago, to focus on advancing the state of the art in the design and assembly of solar cells and modules”. GT referred to a “research operation,” which immediately set off my alarm that Merlin product was not tested inside a Bay Area PV module warehouse, but instead it came out a R&D facility located in the Bay Area. GT does not have a R&D facility or even an office inside the Bay Area, which only leaves one option; a research lab that is run by a leading PV module maker.

Merlin the Magnificent

Merlin is GT’s solution to improving the downstream solar equipment marketplace. The Merlin PV module offers a drastic improvement over current PV modules in 5 key areas; total system cost, solar cell efficiency, weight, flexibility and durability. GT’s Merlin technology is expected to deliver a total cost reductions of over 10% and cut silver paste use by up to 80%. The drop in silver paste usage as a result of Merlin’s patented design results in a lighter PV module, which may explain Merlin’s improved flexibility over other PV module designs. Additionally, Merlin demonstrated the ability to improve solar cell efficiency by 0.7% as well as significantly improving overall module durability. A solar cell efficiency gain of 0.7% doesn’t sound like much but when most solar cells are hovering around 17% it represents a 4% improvement. GT’s Merlin PV module technology is “agnostic,” and will improve the efficiency of any type of solar cell. GT also informed investors that Merlin would not be sold exclusively to any one potential customer, which opens the door for all PV module makers to enjoy GT’s game changing technology. Images below were taken from GT’s March Technology briefing.

(click to enlarge) (click to enlarge)

GT’s Long Term Relationship with Yingli

If I was to develop a game changing technology with a PV module maker I would not only want to the biggest fish but I would want someone I trust. Someone that I have worked with years! As it turns out Yingli Green Energy (YGE) not only was ranked #1 in 2013 for producing PV modules, but their relationship with GT Advanced Technologies (formerly GT Solar) goes back to 2002, when Yingli became GT’s first customer in China. Also, if you look at the various orders placed over time by Yingli the press releases contain language that translates to “hey scratch my back and I’ll scratch your back.” If you don’t believe me, read these comments between GT and Yingli’s within this order announcement from 2010 to that is focused on celebrating GT Solar’s 1000th DSS450 Crystalline Ingot Growth Furnace shipment as well as the very close relationship between the companies.

GT Solar International, Inc. (NASDAQ: SOLR), announced that it has achieved the milestone shipment of its 1,000th DSS450TM crystalline ingot growth furnace. The recipient of the system is long-time Chinese customer Yingli Green Energy Holding Company Limited.

 

GT Solar is a trusted and valued partner for Yingli,” said Mr. Liansheng Miao, chairman and chief executive officer of Yingli Green Energy. “Their ingot growth furnaces consistently produce high quality material which helps to reinforce our company’s reputation for delivering reliable products to our customers.

We are pleased that Yingli continues to express confidence in our ingot growth technology,” said Tom Gutierrez, president and chief executive officer of GT Solar.

Yingli Green Energy became GT Solar’s first customer in China in 2002 when they set up the first ingot, wafer and cell production lines at their Baoding headquarters. These production lines launched Yingli into the PV manufacturing industry and today they are one of the world’s leading fully vertically integrated PV manufacturers. Yingli has continued to invest in GT Solar’s multicrystalline ingot growth furnaces including the DSS240, which was introduced in 2003, and the current DSS450, which was introduced in 2007. Today, GT Solar has shipped over 1300 crystalline growth furnaces to customers around the world.

It’s very clear that Yingli and GT have a mutually beneficial relationship and both companies have admiration and appreciation of the benefits that have resulted from their long partnership. GT has enabled Yingli to continue to be a leader in the PV module space while Yingli’s investment in GT equipment has allowed GT to expand its business and invest money in its R&D to support the next generation of equipment that will benefit Yingli even more.

GT typically goes after strategic deals with the best and the biggest companies in their target market (i.e. Apple for sapphire), so it only makes sense that GT would reach out and try to work with one of the top 3 PV module makers in the world. According to Solarbuzz 2013 rankings the top 3 PV module makers were

  1. Yingli Green Energy
  2. Trina Solar
  3. Sharp Solar

So far I have focused on GT’s Q4 prepared remarks that indicated GT’s patented Merlin technology came out of a research operation in the Bay Area over a year ago. Secondly, I dug into GT’s closest and longest relationship with a PV module maker by the name of Yingli, that was consummated in 2002. Lastly, I provided 2013 Solarbuzz rankings of the top 10 PV module makers and focused on the top 3, which included Yingli. The only item that is missing to connect the dots is a R&D facility that is run by a leading PV module maker inside the Bay Area. As it turns out, Yingli opened up a Bay Area R&D facility in 2011 with the primary focus of accelerating their understanding of module performance and reliability. Yingli’s R&D facility located in the Bay Area is the perfect facility for GT to battle test its Merlin technology and truly understand how Merlin stacks up against the competition.

Yingli Opens up a Bay Area R&D Facility in 2011

Yingli announced on July 12, 2011 that the company was opening up a R&D facility in the San Francisco Bay Area for comprehensive product testing and evaluation. Furthermore, the announcement indicates that the new research and development lab will accelerate the company’s understanding of module performance and reliability. Additionally, R&D facility lab will allow Yingli to evaluate new technologies and deliver next generation products.

Yingli Americas also announces the opening of a new research and development facility in South San Francisco for comprehensive product testing and evaluation.

“Our new research and development lab will accelerate our understanding of module performance and reliability,” said Brian Grenko, Director of Operations for Yingli Americas. “This investment will enable us to more quickly evaluate new technologies, deliver next generation products, and better serve our customers throughout all stages of a project’s life cycle.”

“We now have the ability to offer product testing and development support within the U.S. for our customers here,” added Mr. Petrina. “We plan to use this new facility to proactively address market opportunities and trends to better support our pre- and post-sales efforts – a sign of our continued dedication to technical leadership.”

Image from Yingli

(click to enlarge)

Image from Yingli

Additional Images of Yingli’s PVTL obtained from Greentechmedia

Conclusion

GT mentioned that Merlin came out of a research operation that was established over a year ago. I was able to retrieve a copy of GTAT’s “Investing in Continued Growth and Diversification” presentation, that was discussed in August 2012 during Canaccord Genuity Growth Conference (image below). GT’s 2012 presentation clearly indicates its intentions of heading downstream and venturing into Module Manufacturing. The August 2012 presentation states GT is, “considering opportunities to move downstream solar equipment market to support next generation solar cell and module manufacturing.” As it turns out, it took GT less than 2 years to introduce Merlin as an opportunity and then bring it to the market. GT’s module manufacturing opportunity, which officially was introduced as “Merlin” technology, is referenced in the second bullet point in the image below.

(click to enlarge)

I’ve established clear evidence that GT’s Merlin PV module technology fits like a “T” within the primary scope of Yingli’s Bay Area PV Testing Lab’s that was established over 2 years ago in 2011. The contract announcement in 2010 between GT Solar (renamed to GT Advanced Technologies) clearly exhibits the co-dependencies, trust as well as a high level of engagement between both companies. Additionally, Yingli has been ranked near the top of the PV module supplier charts for the last several years. I believe Yingli is the “unnamed” collaborative resource, that helped GT battle test and monitor the results of GT’s game-changing Merlin technology within their Bay Area research operation, that opened its doors in 2011.

According to the market research firm IHS, Yingli claimed the #1 spot again in 2013 as the biggest PV module supplier, increasing the company’s market share from 7.4% (2012) to 8.3% in 2013. Solarbuzz reported that the top 2 PV module suppliers (Yingli and Trina Solar (TSL) accounted for 15% of PV module shipments in Q4 2013. Trina Solar is also long term customer of GT and has placed over $70m of solar equipment orders with GT since 2008. Trina Solar placed a $49m Polysilicon reactor order in 2008 and a DSS equipment order totaling $24m in 2010.

GT indicated that Merlin could generate $1B a year in annual sales based on a 20% market adoption rate by 2018. Yingli and Trina Solar have a combined PV module market share of 15% as of Q4 2013. GT likely “battle tested” Merlin at Yingli’s R&D facility in the San Francisco Bay Area and Trina Solar has been a long time GT solar equipment customer since 2008 or earlier.  GT is well positioned to sell Merlin to the top 2 PV module suppliers in the world and drive Merlin’s market adoption rate above 15% and generate over $800m of annual revenue from with just two customers much sooner than previously expected.

(click to enlarge)

GT’s CEO Tom Gutierrez indicated during the March technology briefing that, “we don’t build the trap and wait for the mice, we work directly with the customer to find out what they want”. I just hope GT has enough cheese to feed all the mice that will come crawling through the door for a bite of GT’s Merlin technology. Furthermore, it wouldn’t surprise me in the least, if Yingli and GTAT celebrate their long tenured relationship and continued partnership within Merlin’s inaugural order announcement in the 2H of 2014.

 

by Matt Margolis

Yingli Green Energy reported their Q4 2013 earnings on March 18th.  I wanted to take a closer look at their conference call to understand their solar industry outlook as well as to try to find Merlin.  No I am not talking about “where is Waldo” but where is GTAT’s Merlin technology headed?  GT’s CEO Tom Gutierrez did mention that Merlin would most likely not be named by the PV module makers but that we would be able to recognize Merlin if we saw it.  So my question is, where is Merlin?

 

Yingli Raises $83m of Cash for China Power Plants

Yingli announced plans on Friday to raise $83m via a secondary share offering.  The company indicates that the funds will be used to build solar power plants in China. The shares were offered 17% below Yingli’s closing share price on Thursday and the stock traded down nearly 13% on Friday.

 

Yingli’s Solar Industry Outlook

Looking ahead, we’re optimistic on the state of the solar industry in the U.S., Latin America and the overall region. 2014 is picking up where 2013 left off, demand is strong in our book of businesses filled and well-balanced. The momentum we are witnessing we will be enduring and we believe that we are just getting started in what will be a tremendous end market for years to come. We are confident that with cooperation and support of our customers and other key stakeholders, we will navigate the uncertainty of this new trade petition and soon be able to focus on our key mission, which is drive adoption of solar energy across the continent and the world. (Seeking Alpha)

 

Next Generation PANDA series modules: Bigger, Lighter & Highly Efficient

In 2014, we expect to mass produce a variety of new generation of other PANDA series modules, bigger but lighter weighted and high-efficiency. our proprietary goal is to create differentiated products that provide more value for our customers and accelerated the deployment of solar across the world.

A bigger PV module that weighs less than a smaller module is usually an oxymoron.  GT’s Merlin technology, which removes up to 80% of the silver paste from the traditional PV module design would certainly reduce the weight even if the PV module supplier increased the size of the unit.

 

Is Yingli’s next generation of PANDA series modules, that have been described as being; bigger, lighter, highly efficient and expected to be mass-produced in 2014 the first sign of Marlin?

Merlin Timeline

 

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

 

 

 

 

20140428-101008.jpg

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.