Posts Tagged ‘GTAT’

Brian Blair of Rosenblatt Securities May 27th report on the Asia supply chain spotted iWatch models with sapphire screens. Blair also indicated that TPK will make the touch panel for the iWatch. If Blair is correct that TPK will make the touch panel is it nearly a guaranteed lock that the iWatch will feature sapphire cover glass, which will serve as another catalyst for shares of GT Advanced Technology (GTAT).

TPK as it is the major supplier of the touch-on-lens (TOL) process that is required to work with sapphire-based cover glass. Apple’s WWDC begins on Monday June 2 and if Apple wants to introduce the iWatch you can expect GTAT and sapphire cover glass to be a major part of it.

 

Disclosure: I am long GTAT

 

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

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

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

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

 

Advertisements

GTAT – Stifel analyst report highlights

Posted: May 29, 2014 by mattmargolis24 in Uncategorized
Tags: ,

“There is no exclusivity between GT to Apple with regard to Hyperion Output”

GT’s focus on sapphire foil production and lamination has a path to mobile applications in our view

Current estimates are now $678m 2014, 1,332m in 2015 and 2,069m in 2016. EPS estimates $0.07 in 2014, $0.65 in 2015 and $1.64 in 2016.

The firm maintains a $20 PT on shares of GTAT

Key call outs

Merlin % of revenue : 2% in 2015 and 5% in 2016.

Hyperion % of revenue: 1% in 2015 and 4% in 2016.

Sapphire Materials % of revenue: 55% in 2014, 74% in 2015 and 49% in 2016.

ASF Furnaces % of revenue: 28% in 2014, 10% in 2015 and 8% in 2016.

CNBC is reporting that Brian Blair of Rosenblatt Securities May 27th report on the Asia supply chain spotted iWatch models with sapphire screens.

Additionally, the same report said the upcoming iPhone 6 would use sapphire glass from GT Advanced.

On May 23, 2014 leaked images surfaced from nowhereelse.fr of what appears to be Apple’s iPhone 6 LED backlight.Image

Image

The earliest leaked iPhone 5s backlight images that I could find were leaked on September 7th, 2013 just 3 days before the iPhone 5s invite went out.   The iPhone 5s backlight images were also leaked first by nowhereelse.fr.

In other news Vodaphone just slashed the price of the iPhone 5c on Friday. Target just dropped the price of the gold iPhone 5s to just $119.99 from $199.99 with a 2 year contract.    Walmart was the first to offer aggressive reduced pricing of the iPhone 5s to $119.99 back in March.  Radioshack in April reduced the price of the iPhone 5s to just $99.99 and the price remains intact today.

The wave of iPhone 5s price cuts fall line very closely with an International Business Times article from January, which indicated that Apple will slash the price of 5s by $100 in May 2014.  The IBT article also mentioned a possibility of a May and September iPhone 6 release schedule based on news picked from South Korea.

Conclusion

The wave of iPhone 5s price cuts and the most recent leaked image of the iPhone 6 backlight indicates that production is underway and release of Apple’s iPhone 6 could come anytime.  At this point I’m not expecting a iPhone 6 release at Apple’s WWDC that begins on June 2nd, but every data point seems to indicate that the iPhone 6 release is coming before September.

 

 

My Previous Articles on related to the iPhone 6 release date

https://margolismatt.com/2014/04/20/a-review-of-apples-supply-chain-management-indicates-a-june-iphone-6-release-is-likely/

https://margolismatt.com/2014/04/21/iphone-5s-price-slashing-activity-is-pointing-towards-a-june-iphone-6-arrival/

https://margolismatt.com/2014/04/27/apples-2014-wwdc-solar-charging-products-and-better-film/

https://margolismatt.com/2014/05/11/several-apple-analysts-believe-the-iphone-6-will-arive-as-early-as-june/

 

Disclosure: My premium PTT Research Forensics Newsletter is scheduled to launch on June 2nd. The premium paid service option will grant my paid subscribers exclusive content weeks before my analysis is published on Seeking Alpha, the Obscure Analyst blog or any other website.  Another advantage of PTT is the subscriber Forum that allows sharing of ideas and analyst Q&A. Did you know, that subscription based investment newsletter are typically tax-deductible?

 

Additional Disclosure: I am long GTAT (Apple’s newest Sapphire supplier)

 

I’ve been working diligently on my PTT Premium Forensics Newsletter launch.  I’ve rolled up my sleeves (well not really) since I hate long sleeve shirts, but needless to say I am very deep in my research on my next great investment pick.  I’ve been gathering as much information as I can to understand everything that has happened over the last few years as well as digging into the “data” on this company.  The information and data points will give me context of where this company came from, where it is going as well as the various “treats” investors should be expecting over the remainder of the year and into the future.

My favorite part of researching is learning.  My second favorite part of researching is sharing.  My final favorite part of researching is sharing what I learned with people, who want to profit from it.  Every time I dig into my research it takes me places I didn’t know existed so my end product is typically more in depth than my own expectations. I am very excited to share my next great investment pick with my premium PTT Research Forensics Newsletter subscribers on June 2nd!

 

 

Disclosure: My premium PTT Research Forensics Newsletter is scheduled to launch on June 2nd. The premium paid service option will grant my paid subscribers exclusive content weeks before my analysis is published on Seeking Alpha, the Obscure Analyst blog or any other website.  Another advantage of PTT is the subscriber Forum that allows sharing of ideas and analyst Q&A. Did you know, that subscription based investment newsletter are typically tax-deductible?

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

GT Advanced Technologies (GTAT) is making a structural change at the head of its finance division by recruiting a CAO.  The move signals the end of the dual title of CFO/CAO that has persisted over the last several years.  GT named Raja Bal as Chief Accounting Officer (CAO) and “successor” CFO on January 16th, 2014.  Raja Bal succeeded Richard Gaynor as GT’s CFO on March 7th, 2014.  GT is currently in the process of transforming its business and becoming a “high growth, multi-national/global, diversified high technology manufacturing company”.

GT’s latest move should free up the Raja Ball from the day-to-day accounting operations and allow him  to focus on the company’s strategic initiatives.  The new CAO will be taking over GT’s day-to-day accounting functions of the organization and will also be responsible for managing GT’s quarterly and annual financial reporting.  The CAO will also “support the selection, negotiation and due diligence processes for acquisition targets”.    Additional CAO position details are listed below:

The ideal candidate will have a minimum of 5 years’ experience as a CAO / Corporate Controller with 15-plus years of progressive financial management experience with publicly traded, high growth, multi-national/global, diversified high technology manufacturing companies.

Provide leadership and oversight of all aspects of the controllership and accounting functions of the organization including payroll, accounts payable, billings and receivables, internal audits, external audits, and SOX requirements.

Be responsible for timely and accurate dissemination of financial reports and leadership highlighting major issues and trends and commentary on variances from plan, prior year and forecast.

Expertise in issues specific to high volume manufacturing environments including cost accounting, factory cost pools, standard cost, variance analysis and overhead absorption. Demonstrated ability to drive product cost reduction and operating expense rationalization initiatives.

Manage quarterly and annual reporting including the completion of financial statements and footnotes, management’s discussion and analysis encompassing review of all new accounting matters, application of judgment, and significant matters for discussion with disclosure committee.

Impeccable integrity; words and actions must continually reinforce this characteristic.

Support the selection, negotiation and due diligence processes for acquisition targets. Oversee and coordinate the financial and accounting diligence efforts and integration process. Manage consolidation of accounting and reporting requirements for acquisitions.

Exceptional communication skills; experienced and effective in interacting with senior executives and line management at all levels. Credible, persuasive and clear in both oral and written presentations.

Effective interpersonal skills; must be able to relate to and work cross-functionally with a wide variety of professionals across different cultures. A certain level of travel will be required to GT’s locations domestically and in Asia.

 

Full Disclosure I am long GTAT and I have joined PTT Research.  My premium Forensics Newsletter is scheduled to launch on June 2nd.  The premium paid service option will grant my paid subscribers exclusive content weeks before my analysis is published on Seeking Alpha, the Obscure Analyst blog or any other website.  Another advantage of PTT is the subscriber Forum that allows sharing of ideas and analyst Q&A.  Did you know, that subscription based investment newsletter are typically tax-deductible?

Patently Apple reported this morning on Apple’s newest sapphire patent that was published earlier today. The patent notes the need to protect control mechanisms, including buttons, pushbuttons, slide and toggle switches from environment effects, which include temperature extremes, humidity, contamination (I’m guessing this one is accidental dropping into a toilet or other unsanitary places), physical and electrical contact scratching and impact.

The main focus of the patent is to improve durability and reliability of electronic devices. The patent also defines the ”electronic devices” that may deploy sapphire cover materials including; portable phones, digital assistants, personal computers, computer displays, media players and other portable (like the iWatch) and stationary electronic devices. Other devices that are also named in the patent include; mobile telephones with media player capabilities, game players, remote global positioning and telecommunication devices, laptops, desktops, notebooks, hand-held and ultraportable computer devices.

The patent also indicates that sapphire could be used on the front, back or within the interior housing of the device.

20140522-130429-47069974.jpg

20140522-130429-47069827.jpg

20140522-130429-47069437.jpg

20140522-130430-47070274.jpg

20140522-130430-47070125.jpg

20140522-130429-47069629.jpg

Full disclosure: I am long GTAT

 

 

 

Image

GT is likely showcasing it’s Spark Plasma Sintering (SPS) technology in Orlando based on the “#sintering” in the company’s tweet.  Here is some information on GT’s SPS technology that was acquired through GT’s acquisition of Thermal Technologies as well as the targeted industries this technology can impact.

 

Thermal Technology Acquisition

GT made it clear almost two years ago that they were interested in getting into thermo electric converters for hybrid electric vehicles.  This interest was highlighted the press release when GT acquired Thermal Technology.

The company has also acquired Spark Plasma Sintering (SPS) technology, which allows dense ceramics to be obtained under uniform heating at relatively low temperatures and in short processing times. The SPS technology is expected to have a wide range of applications including with medical applications, sputtering targets, space applications and thermoelectric converters for hybrid electric cars.

One important item to highlight is Spark Plasma Sintering (SPS) technology, this wild machine turns ceramic powder into a dense crystalline material in less than 5 minutes versus other machines that take hours.   GT envisions using this technology to and their ceramic patent  (acquired through GT’s purchase of Twin Creek’s Technology) to create a thin semiconductor lamina adhered to a ceramic body.  The ceramic bodies would be formed using GT’s SPS technology.  The patent states that devices can be formed in the lamina, including photovoltaic devices. The ceramic body and lamina can withstand high processing temperatures. In some embodiments, the ceramic body may be conductive.  This ceramic patent also involves Hyperion to produce thin semiconductor lamina.

THE SPS PROCESS

Unique to SPS is the DC current generating heat internally, as opposed to conventional methods of materials densification such as hot pressing, wherein the heat is external to the sample. While other traditional methods of materials processing require hours to reach peak temperature, Thermal Technology’s SPS takes only minutes. The clear benefits of SPS are the significant savings of time and energy and the ability to retain nano-structures.

Screenshot - 3_9_2014 , 9_52_15 PM

 

Full Disclosure I am long GTAT and I have joined PTT Research.  My premium Forensics Newsletter is scheduled to launch on June 2nd.  The premium paid service option will grant my paid subscribers exclusive content weeks before my analysis is published on Seeking Alpha, the Obscure Analyst blog or any other website.  Another advantage of PTT is the subscriber Forum that allows sharing of ideas and analyst Q&A.

 

by Matt Margolis

Last week GT Advanced confirmed the company’s guidance of $600-800m for 2014 and management could not provide a breakdown as to when or what way Apple could use sapphire.  GT did confirm on the conference call that all of the sapphire being produced will be utilized.  I’ve been asked by various investors and followers whether or not the iWatch alone is large enough to hit GT’s guidance of $600-800m of revenue in 2014.  My simple answer is no.  I’m estimating an ASP of $4 for each sapphire iWatch screen and even if Apple’s iWatch sales exceed 60m in 2014 it would only amount to $240m of revenue for GT.

The Apple/GT Mesa, AZ sapphire plant measures over 1.3 million square feet and I have read some reports that Apple would be dedicating this facility to produce sapphire home buttons and iWatch sapphire covers. GT announced recently that its 165 kg boule sapphire growth furnace was going to be commercially ready in Q3’14.  Additionally, GT also announced that they have sapphire growth furnaces that are producing “significantly” larger sapphire boules than 165 kg.  These larger ASF sapphire growth furnaces were being held captive for the company’s internal use but they are production ready and are likely in operation in Salem, MA and Mesa, AZ.

# iWatch Screens per ASF Furnace

There are a lot of factors that go into calculating the screen yield per ASF furnace and the difficult part is that the factual information is not readily available from the two parties involved.  What facts I do know can help everyone understand just how extraordinarily the  amount of sapphire that will produced inside the Mesa, AZ sapphire plant will be once it reaches full capacity.   I modeled out the iWatch at 1.5″ by 1.5″ which actually equates to a 2.25″ screen size which is significantly larger than sub 2″ screen estimates I have seen from various analysts. The sapphire screen thickness for my calculations is 0.60mm which is just 0.05mm  thicker than the current thinnest version of gorilla glass.  The boule size for my calculations was 200kg and 230kg, based on my conversations with a leading sapphire expert and commentary I’ve seen by GT regarding the company’s planned larger boule size.  Additionally, I’ve modeled out the days to grow a boule at 17 days and 22 days, currently GT specifications on the ASF115 are “18 days or less”.  I did reach out to GTAT for clarification on the specifications of the ASF165 and the company representative declined to comment.  Lastly, I’m estimating that 20% of the sapphire boule will be lost due to kerf loss and/or any other defects.

Based on my calculations, 1 ASF furnace can produce between 800,000 and 1.1 million, 2.25″ screens that are 0.6mm thick iWatch sapphire cover screens each year.  If Apple sells 60m iWatch units in 2014 it would require between 55 and 75 ASF growth furnaces running 12 months of the year to produce enough sapphire to cover 60m iWatches with sapphire.  Keep in mind that the Mesa, AZ sapphire plant is expected to house 1500 to 2000+ furnaces.  A fully ramped up Mesa, AZ sapphire plant would be able to cover 1.2 billion and 2.2 billion 2.25″ iWatches a year with 1500 to 2000 furnaces running year round  Additionally, if you believe that the Mesa sapphire plant is just for home buttons, you should realize that the plant would be able to produce at least 10 and 20 billion sapphire home buttons a year once at full capacity.

Conclusion

The Mesa, AZ sapphire plant owned by Apple and operated by GT Advanced Technologies will produce an extraordinary amount of sapphire.  I can assure you that home buttons and iWatch covers will not make a small dent in the amount of sapphire that will be produced annually within the 1.3 million square foot facility in Mesa, AZ.  GT recently commented during the company’s Q1 2014 conference call that Apple will utilize all of the sapphire being produced.  GTAT and Apple have not commented, confirmed or answered any questions directly related to the use of sapphire in Apple’s products, but a savvy investor would sit back and realize its going to take hundreds of millions of Apple devices sold annually to consume the extraordinary amount of sapphire that will be produced inside of Mesa, AZ.

 

GT’s CEO Tom Gutierrez, May 8th 2014 Q1 2014 Conference Call

I can tell you that we are producing sapphire, and that I expect that the sapphire we produce will be fully utilized.