Posts Tagged ‘Hyperion’

by Matt Margolis

During the March 14 GT Advanced Technologies New Product and Technology Briefing, GT’s CEO Tom Gutierrez was asked whether or not Hyperion 4 was included within the exclusivity clause with Apple.  His response was that Hyperion was not currently covered within the exclusivity under the Apple agreement.  The million dollar question that remains open is, what is covered or not covered under the Apple exclusivity clause within the current contract?

According to the contract GTAT cannot enter into performing the “same” or “similar Development Services in the Consumer Electronic Field” while performing “Development Services for Apple, and for 3 years following the date that GTAT ceases to perform the Development Services for Apple”.  Development Services definition seems to be very specific and I would correlate this to mean that GT cannot enter into a materials agreement to grow sapphire and develop sapphire materials for consumer electronics while performing the same service for Apple or until 3 years after GT ceases to grow sapphire and develop sapphire materials for Apple.

The next part of the exclusivity contract language may require some legal interpretation.  In addition to restricting GT’s ability to grow sapphire materials for the Consumer Electronic Field the contract also states GT cannot “assist, enable or in any way facilitate any other person or party in its provision of the same or similar Development Services for any other person or party”.  This could be interpreted to mean that GT cannot sell any ASF sapphire growth furnaces that could land in consumer electronic products, which means that GT’s ASF furnaces could only be sold for LED purposes.  Another interpretation on the other end of the spectrum is that GT simply cannot enter into a sapphire materials contract similar to Apple within the Consumer Electronic Field.  The key words to digest in the second part of the exclusivity contract language are “assist, enable and facilitate”.  When GT sells a ASF furnace to a customer they do go to the customer site and train the customer to help them maximize their results using GT’s equipment so I’m not sure where to draw the appropriate line.   I’m curious what everyone else thinks?

 

1.4.   GTAT agrees that while performing the Development Services for Apple, and for 3 years following the date that GTAT ceases to perform the Development Services for Apple, it will not to the best of its knowledge, after conducting reasonable due diligence, perform the same or similar Development Services in the Consumer Electronic Products Field for any other person or party, nor will GTAT assist, enable or in any way facilitate any other person or party in its provision of the same or similar Development Services for any other person or party. “Consumer Electronic Products” [***].

Intellectual Property (IP)

According to the master supply agreement Apple has granted GTAT a “limited, non-exclusive, worldwide, royalty-free license to Apple’s IP rights including Apple’s patents and/or any other trade secrets, data or materials that are necessary to perform the Development Services and other obligations under the Agreement.  What this means is that every patent that Apple has filed related to sapphire and various other uses, if GT needs to use them as a result of Apple’s development services needs than GT will have the rights to do so.


4.1.   Except as otherwise provided herein, no right or license to Apple’s Intellectual Property Rights is granted or implied as a result of the Agreement or the Development Services, except that Apple hereby grants to GTAT a limited, non-exclusive, worldwide, royalty-free license to use Apple’s Intellectual Property Rights (including Project Work Product) solely to the extent necessary to perform Development Services and other obligations under the Agreement.  The transfer or license of Project Materials or GTAT Background Technology provided herein does not constitute a public disclosure. “Intellectual Property Rights” means the rights in and to all (i) U.S. and foreign patents and patent applications claiming any inventions or discoveries made, developed, conceived, or reduced to practice, including all divisions, substitutions, continuations, continuation-in-part applications, and reissues, re-examinations and extensions thereof; (ii) copyrights; (iii) unpatented information, trade secrets, data, or materials; (iv) mask work rights; and (v) any other intellectual or other proprietary rights of any kind now known or hereafter recognized in any jurisdiction.

On the GTAT side of the fence Apple will be sole property owner to “all results, reports, findings, conclusions, work papers, notebooks, electronic records, samples, prototypes, deliverables, and any other information or materials,” that arise from the performance of the Development Services by GTAT.  However, Apple will not have the rights to GTAT Background Technology, which includes Hyperion 4.

All results, reports, findings, conclusions, work papers, notebooks, electronic records, samples, prototypes, deliverables, and any other information or materials in any form or format arising out of performance of the Development Services by or for GTAT (the “Project Work Product”) except GTAT Background Technology (defined below) will be the sole property of Apple and will become part of the Confidential Information to be protected under the Agreement.

What will not be the sole property of Apple will be GTAT’s Background Technology, which will be “will be owned by GTAT and is not being transferred or assigned to Apple under the Agreement”.  GTAT’s Hyperion 4 technology falls within GTAT’s Background Technology and is it therefore not currently covered within GT’s exclusivity agreement with Apple just as GT’s CEO indicated so clearly during the March 14th Technology Briefing.    GTAT’s Background Technology includes, inventions, data, improvements, discoveries, etc. that were “created or developed by or for GTAT either (i) prior to the date of the Agreement or (ii) subsequent to the date of the Agreement,” assuming that these inventions were “created or developed by GTAT separately and independently” from GTAT’s Development Services work performed on behalf of Apple or any “Apple Confidential Information or Project Materials, and all Intellectual Property Rights”.  Essentially any inventions, processes and methodologies that GT had already developed prior to their agreement with Apple will continue to be owned by GT and the rights to these technologies will not be transferred to Apple.  I have read some comments that GT gave away everything in the deal but it looks like GT will retain the rights to all of their proprietary knowledge and inventions related to sapphire growth, inspection and processing methodology and know-how.

“GTAT Background Technology” means GTAT’s inventions, data, improvements, discoveries, ideas, processes, methodologies, formulas, techniques, works of authorship, trade secrets and know-how, whether patentable or not, conceived, reduced to practice, authored, or otherwise created or developed by or for GTAT either (i) prior to the date of the Agreement or (ii) subsequent to the date of the Agreement if conceived, reduced to practice, authored, or otherwise created or developed by GTAT separately and independently of its provision of any Development Services and any Apple Confidential Information or Project Materials, and all Intellectual Property Rights therein or thereto.  GTAT Background Technology is and will be owned by GTAT and is not being transferred or assigned to Apple under the Agreement.  For the avoidance of doubt, any Sapphire Technology that is conceived, reduced to practice, authored, or otherwise created or developed by or for GTAT using (i) any of Apple’s Confidential Information or (ii) any GTAT personnel or contractors who had access to Apple’s Confidential Information will be deemed Project Work Product.

 

 

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

 

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Hyperion is not part of GTAT’s Exclusivity with Apple – Now What? – by Matt Margolis

I’ve been seeing some recent chatter regarding comments TG made during the technology conference on held on 3/14/14.  TG indicated that Mesa, AZ was an Apple plant and that “Hyperion was not part of our exclusivity with Apple”.  So what does this mean?  In order to answer this question and chatter I always look to the past for specific comments made from TG to help understand his recent message.  For this one I turned back the clock to the Q4 2012 conference call.

Q4 2012 Conference Call TG Comments

We believe that current sapphire fabrication techniques, excluding Hyperion, will support the adoption of sapphire in several applications including smartphones and point-of-sale systems.

(Sapphire Laminates are) a broader application than what we would not consider to be the true smartphone area, where a pure sapphire solution is more likely, okay?

The comments from TG above definitely indicate that pure sapphire cover screens will support adoption for smartphones.  Apple wants sapphire for more than just the scratch proof strength and they will not settle for anything less than pure sapphire.  Also, if you take a look at Apple’s sapphire patents, it is quite clear that Apple has much bigger plans with pure sapphire versus just adding sapphire laminates to their devices.

Sapphire Laminate Marketplace

Since Apple does not appear to limit GT’s application of sapphire laminates layered on poly carbonate or glass substrates, the question is what market’s will they go after with this new technology?  One answer looks like the broader mobile phone market and tablet market place.  They could also supply Hyperion tools to an aftermarket player that wants to supply sapphire laminates for mobile or tablet marketplaces.  Other potential targets for sapphire laminates include navigation systems, music players, point-of-sale and touchscreen markets.  I came across a research report last week from Barclays who covers TPK.  The Barclays report gave confidence that TPK’s TOL (Touch on Lens) business related to sapphire laminates was anticipated to grow.  The report also indicated Apple was likely to introduce an iPad with sapphire laminates at some point down the road.  Needless to say there seems to be a lot of buzz in the sapphire laminate market outside of Apple’s pure sapphire solution.  Below are TG’s comments from Q4 2012 related to the potential sapphire laminate marketplace.

Q4 2012 Conference Call TG Comments

We also believe that there could be an incremental future market opportunity using Hyperion to create lower-cost sapphire laminates for broader mobile phone and aftermarket applications.

The objective (is)  to build another end to the business other than the high-end smartphone, the broader smartphone part of the marketplace.

Sapphire laminates are expected to have some, but not all, of the attributes of a pure sapphire solution and are expected to have a cost structure that rivals current cover glass products on the market today.

It’s really expanding into the lower part of the market that wouldn’t normally consider using a sapphire (solution) because the technique that we’re developing would get you a sapphire surface on a polycarbonate or glass substrate.

An aftermarket, if you think of the laminates and the substrate that are out in the marketplace that you put on your phone on an after-market basis to protect it, there’s a potential for creating an after-market laminate business here as well.

To make it clear, we’re not going to make laminates. We make Hyperion cleaving tools that we will sell to people that let them do that.

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

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GT spent near 3 hours going over their new technology and painted a tremendously positive picture for GT’s future.  I wasn’t there in person but you could tell TG’s swagger was in full gear.  He was excited, very excited, so excited, the most excited he’s been in his 5 years with the company, so excited he even chose to dress up for the occasion and leave the jeans at home.  The event also celebrated the “new GT” and discussing adding well over $3b of potential market share for the company.

I’ve updated my revenue model based on the Technology update on March 14.  TG made it clear that he does not bring new products to market until the market is ready.  With that said there will be additional items brought to market by 2016 and 2017 but at this point they are not included.  It is also likely that Apple will adopt sapphire covers for the iPad in the future, whether they are sapphire laminates on some sort of glass or pure sapphire covers like the iPhone and iPod. In additional to Apple, I fully expect GT to enter the sapphire laminate material business and those revenues are not included in my current model. Additionally, TG acknowledged there are additional products in R&D that they are working on as well and they will continue to invest in R&D spending 4x what they used to spend (consistent with what we saw in 2013).

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Merlin – GT expects to receive their first PO for Merlin in 2H2014.  GT’s estimated peak market share of 20% by 2018 might be very conservative, as TG pointed out “the potential is staggering”.  GT made a point on the call that, “once solar was in the bag” for Merlin they would move into other markets.  TG indicated that once penetration hits over 20% for Merlin they would likely look to bring this production back to the US and open up a plant of some kind to get an additional piece of the pie.  Merlin customers so far have been saying “we want it tomorrow and we want exclusive rights,” at this point GT is not granting any exclusive rights to the product.  Merlin Technology is also agnostic to the specific cell design and offers efficiency improvement either way.  A product that offers a 10%+ cost savings, half the weight, twice the flexibility and more efficient design sounds like a game-changer to me!

HiCz – GT has pulled forward this product and is expecting an order of substance to be received in 2014.  I expect revenue recognition beginning in 2015 related to this order.

Mono/Poly Crystalline Markets have come back faster than TG thought and this is reflected in the DSS and SDR revenue expectations beginning in 2015.  GT’s product offer the lowest capital cost per kg in the market.  It is no wonder they remain confident to win every bid they are involved in related to Polysilicon Production Facilities.

Hyperion – Working with Tier 1 Power Device Manufacturers for SiC.  Engaged with lead LED customers for downstream LED.  Working with a lead Solar customer in Asia.  Working with Military and Medical industries and expect to see a purchase order in 2014.  Hyperion 4 can produce 10x more power than any existing implanter tools on the market and GT is pricing their technology at the same ASP $ level as competitor implanter tools on the market.  Hyperion 3 took 200 man years to assemble and GT has moved from the Hyperion 3 to the Hyperion 4, which produces 2 mega electron volts up from 1 mega electron volts, that could be found in the Hyperion 3.  The technology is protected by 55 patents and 25 more that are pending.  The current patents are across the entire solution, application, process and equipment.  This is the only exfoliating machine on the market because of it’s unique design and power.

My Estimates

My 2015 and 2016 estimates have not changed significantly from what I had before the 3/14 Technology Conference.  My margin has improved based on comments from TG regarding Hyperion and that it would carry “superior margins” to GT’s historic rates because no one else has a product like it in the marketplace.

Updated Revenue & EPS: 2015 $3.177 B – $2.84 EPS, 2016 $4.736 – $5.26 EPS

Previous Revenue & EPS: 2015 $3.177B – $2.74 EPS and 2016 $4.416B – $4.26 EPS.

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~Obscure Analyst 3/16/14

I am long GTAT and have no plans to buy or sell any holdings in the next 72 hours (or even 3 years based on this forecast!)

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GTAT Hyperion Equipment Business worth $13-20 at a Minimum Right Now! – by Matt Margolis

GT management spent several hours going through their technology tool set and threw a lot of information at investors.  I am attempting to put together the pieces to come up with a breakdown for everyone.  The first area I wanted to focus on was the Hyperion 4, which is commercially ready in 2014.  GT management also provided investors with their 4 year projected unit sales of Hyperion.  Going from approximately 10 units to 200-250 units by 2018.  The unit number is not tremendous but at a ASP of $4-15m each, the dollars and cents add up fast.  I have modeled up a sales ramp from 2015 to 2018 along with 3 valuations on ASP, from $4m to $15m with a most likely scenario of somewhere in the middle at $9.5m per Hyperion 4 unit.  I am valuing just the equipment sales component of Hyperion and this has nothing to do with material sales such as sapphire laminate for electronic devices and consumer applications.

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As you can see from my chart Hyperion has the potential to over $2b a year in sales and contribute over $3.00 per share to GT’s bottom line by 2018.  I have assumed GT can convert Hyperion sales of 50% of their potential identified market.  It is clear from the call today that the Hyperion 4 is head and shoulders above the competition.  Below are my estimated 2015 and 2016 contributions assuming middle of the road pricing and a 50% conversion rate of the potential market.  The Hyperion 4 technology is now a proven solution and is being used by beta customers today and will be delivered to several other customers by the end of the year in LED, Medical and other areas.

2015 – $48m – $0.08eps

2016 – $404m – $0.65 eps

Taking FY16E x20-30 I’m coming up with $13-20 valuation for just Hyperion 4 equipment sales!  However, if Hyperion is as good as GT management thinks it is my valuation is still very low.

Below are some Hyperion slides from today’s presentation.

Screenshot - 3_14_2014 , 1_26_24 PM Screenshot - 3_14_2014 , 1_26_40 PM

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

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Hyperion’s next frontier: BIPV?

Posted: March 2, 2014 by mattmargolis24 in Hyperion
Tags: ,

Twin Creeks was looking into Building-integrated photovoltaics (BIPV) as a downstream opportunity for Hyperion 3. How long until this opportunity ripens?

Over time, the combination of lower cost and lighter packaging will allow Twin Creeks customers to expand into other markets such as building-integrated photovoltaics (BIPV) and consumer electronics.

The global BIPV and BAPV market will grow from just over 400MW in 2012 to 2,250MW in 2017 representing a five-fold increase, Pike Research forecasts. (Courtesy of PV Tech)

http://www.pv-tech.org/news/report_global_bipv_and_bapv_market_to_reach_2.25gw_by_2017)

BIPV definition:

Building-integrated photovoltaics (BIPV) are photovoltaic materials that are used to replace conventional building materials in parts of the building envelope such as the roof, skylights, or facades.[1] They are increasingly being incorporated into the construction of new buildings as a principal or ancillary source of electrical power, although existing buildings may be retrofitted with similar technology. The advantage of integrated photovoltaics over more common non-integrated systems is that the initial cost can be offset by reducing the amount spent on building materials and labor that would normally be used to construct the part of the building that the BIPV modules replace. These advantages make BIPV one of the fastest growing segments of the photovoltaic industry

http://en.m.wikipedia.org/wiki/Building-integrated_photovoltaics

The term building-applied photovoltaics (BAPV) is sometimes used to refer to photovoltaics that are a retrofit – integrated into the building after construction is complete. Most building-integrated installations are actually BAPV. Some manufacturers and builders differentiate new construction BIPV from BAPV.[2]

Tom Gutierrez (GTAT CEO) 2/28/13 During Q4 2012 Q&A

And quite honestly, I don’t see anybody that’s anywhere near competing with us right now, on next-generation technologies that we’re developing. The Hyperion, nobody’s got that.

I love the Q&A section of each quarterly GTAT conference call because TG gets excited at times and gives out a ton of information.  Additionally, modesty is not a appropriate adjective to describe TG when he talks candidly about GT’s disruptive technology and technical prowess.

In the spirit of sharing I have tracked down a three videos related to Hyperion.  Two interviews with their CEO (very interesting information) and a third video of the Hyperion 3 in action.  This technology is absolutely BAD ASS and will disrupt every industry GT enters and create markets where there isn’t one today.

Video Interview with Twin Creeks former CEO

Interview with Twin Creeks former CEO (very technical and awesome cost info) He at 4:18 he gets into the costs to make it and how the entire process will be transformed by this product.

This video walks through the high level of the technology and shows the mechanical arms pulling out wafers that were exfoliated in just 2 minutes.  The footage and screen shots with comments taking from the video are also 2 years old.

Hyperion in Action and Overview

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Twin Creek’s Hyperion 3 Press Release from March 2012 is very revealing and might I add not a bad patented technology for GTAT to acquire for a mere $10m in 2012!  A single Hyperion 3 system is claimed to process over 1.5 million thin wafers per year, enough for more than 5MW worth of solar cells.

Twin Creeks Technologies, a pioneer in next-generation manufacturing equipment for solar and semiconductor makers, today announced Hyperion: a wafer production system that dramatically reduces the cost of solar modules and semiconductor devices by reducing the amount of silicon and other substrate materials by up to 90 percent.

The key to Hyperion is thinness. Taking advantage of a technology called Proton Induced Exfoliation (PIE), Hyperion generates monocrystalline wafers that are less than 1/10th the thickness of conventional wafers. With thin wafers, manufacturers can profitably produce solar cells and other devices well below today’s best-in-class cost structure. Twin Creeks estimates that Hyperion will permit manufacturers to produce solar cells for under 40 cents a watt in commercial-scale volume production facilities with prices declining over time.

“The thickness of wafers today is based on wafer slicing capabilities and the handling requirements for device processing. In reality, only the very top layer of a substrate plays an active role in generating energy or transmitting signals — the rest is wasted,” said Dr. Siva Sivaram, CEO of Twin Creeks. “By eliminating excess material, we will help solar manufacturers produce modules that compete with grid power and open up new markets for chip makers.”

With PIE, Hyperion effectively uses atoms as a scalpel. Hyperion embeds a uniform layer of high-energy protons, which are hydrogen ions, into monocrystalline wafers to a depth of up to 20 microns. When heated, this new layer expands, cleaving the top surface from the donor wafer to form an ultra-thin wafer that is otherwise identical to the original. The ultra-thin wafer is then further processed into solar modules or semiconductors. Creating wafers with PIE also eliminates the kerf, or wasted silicon, in solar manufacturing.

Hyperion is compatible with a wide variety of monocrystalline wafers — including germanium (used to make concentrated PV solar modules), gallium nitride, sapphire and silicon carbide (LEDs and power electronics). Twin Creeks has initially concentrated on helping manufacturers of crystalline silicon solar cells because of the urgent need to cut the cost of solar power. The lessons learned will further allow manufacturers to employ Hyperion for other applications, such as CMOS sensors.

By reducing the amount of silicon required in solar modules by 90 percent, Hyperion makes the entire silicon wafer value chain more efficient and dramatically lowers the capital needs of its customers. Manufacturers don’t need as many saws, furnaces and crystal pullers to make the same amount of wafers.

Hyperion improves the monocrystalline silicon value proposition in other ways as well. In addition to being much lighter than conventional solar cells, cells produced with Hyperion wafers are also bendable, allowing manufacturers to consider flexible packaging and encapsulants for modules instead of glass. Additional layers of photovoltaic material can be added to wafers as well: Twin Creeks has produced heterojunction solar cells, which combine crystalline and amorphous silicon, in its development center. Over time, the combination of lower cost and lighter packaging will allow Twin Creeks customers to expand into other markets such as building-integrated photovoltaics (BIPV) and consumer electronics.

I hope you all enjoyed the 1st shade of TG and the in-depth review of Hyperion; the next game changing, revolutionary and transformational technology that will bend the adoption and cost curve across every market it touches and open the door to hundreds of new markets and product applications…..

It’s amazing what you can learn by looking at the past and then realizing where you are in the present and where you will be in the future.

My review of the past indicates that we have not arrived at the future. The present is a lot grander than anyone can understand today.

In the future we will learn what we missed from the past. We will learn that clues from the past were absolutely a sign of things to come.

~The Obscure Analyst 2/28/14

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Matt Margolis – 2/25/14

Credit Suisse $18 PT Grade B+ 2015 EPS $1.38 on $1.559B of sales, 2016 EPS $2.12B on $2.122B of sales.  No specifics were provided of product detail but they cited: “normalized earnings of PV, polysilicon, and sapphire businesses with upside from new products”.

UBS $18 PT Grade B- 2015 EPS $1.20 on $1.249B   2016 EPS $1.50 on $1.608B.  Apple sales estimated at $505M in 2014 and $980M in 2015.   2015 total sapphire revenue at $1.055B out of $1.249 (84% of Total Sales).  Estimated Mesa capacity at 1,500 furnaces.

Stifel $12.50-$14.90 PT Grade F 2015 EPS $0.45 on $1.086 sales. 2016 EPS $1.25 EPS on $1.637B sales.  No breakout was given on mix between Apple and other sapphire revenue.  2014 sapphire revenue $0.559B, 2015 sapphire revenue $0.94B and 2016 $1.1B “We view the company’s current product mix supporting $1.25 (2016) and look for the company’s March 15 new product and technology briefing fur further earnings growth drives into 2016”.   Stifel earned their grade, because it’s obvious they haven’t spent any time to dig into GT’s  corporate overview that was published in January 2014 to understand the growth factors for GTAT beyond sapphire.

Canaccord Genuity $21 PT Grade F  2015 EPS $0.50 on $1.109B sales.  2016 EPS $1.52 on $1.887.  Estimated 2,000 furnace capacity for Apple operations. “We reiterate our BUY pm GTAT as we believe the combination of Apple related earnings and the recovery in its LED and Solar business will result in above-consensus earnings growth and multiple expansion.  Canaccord earned their grade, because they failed to do any modeling for 2015.  They expect revenue in Q3 2014 of $324m followed by $264m in Q4 2014.  An annualized run rate of Q4 $264m x 4 is $1.056B versus their full year forecast of $1.109B,which tells me Canaccord assumes no new business coming online in 2015.  Canaccord doesn’t even give GTAT any credit that they will recognize any sizable chunk of their $600m order backlog.

Bank of America $15.50 PT  Grade Double F 2015 EPS $0.70 on $1.086B sales 2016 EPS $1.28 on $1.518B sales.  Bank of America cites that, “GTAT is becoming more of a Sapphire story”.  Bank of America earned their grade, because they failed to understand that GTAT is on it’s way to becoming a fleet of of thoroughbreds and not a “1 trick pony”.  I really wonder if Bank of America has even read the corporate overview or can cite one product GTAT sells besides sapphire.

Obscure Message to the Analyst Community

GT’s management was very clear that 2014 was the year of Apple and execution.  GT’s pipeline is currently $600m strong and very little of this will be booked in 2014.  GT’s management stated that equipment orders would start flying in 2H 2014 and will be ready for revenue recognition at the beginning of 2015.  GT mentioned that one of their customers (OCI) is already restarting their PV expansion project. If the analyst community wants to learn about GTAT’s up and coming products and industries they support perhaps they should try a google search.  The information is readily available and makes for a very interesting late night reading.

Every analyst cited Apple and sapphire as a major driver, but not one of them wanted to get into the Apple product ecosystem to adjust future growth for expanded sapphire usage across the portfolio.  The facility at Mesa is 1.3 million square feet or approximately 52 times greater than GT’s Salem, MA manufacturing facility.  GT’s salem facility held approximately 80-100 furnaces inside, using the same furnace to square foot ratio as Salem the Mesa facility can house between 4,200 and 5,200 furnaces.    Do any of the analysts follow Apple and industry growth projections?  Do the analysts understand the Apple portfolio of products and how GTAT can and will pair Hyperion with sapphire to create sapphire laminates that can be out rolled across Apple’s product portfolios once Hyperion is ready for commercialization in 2015.

The Obscure Analyst’s Analyst Report takeaway :

As an investor I was glad to see upward revisions to GTAT’s target price.  As the Obscure Analyst, I was surprised at how ignorant the analysts are to the markets that GT will begin serving in 2015.  Not one analyst understands GT’s Hyperion technology, that was purchased in November 2012.

GT management left us with this information during Monday’s call which relates directly to Hyperion and Solar Cells:

we have a deployed a new technology that we expect will significantly impact the economics of producing solar cells and modules. This technology was developed and 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 and the design and assembly of solar cells and modules. We look forward to talking with you about this development on our March ‘14 webcast.

Well here is your spoiler alert:  Hyperion is going to be  a “disruptive technology” and a “game changer” that can and will be applied across all of GTAT’s platforms in the foreseeable future and for the foreseeable future.   During the March 14, 2014 webcast GT management will most certainly focus some of it’s attention on the design and assembly of solar cells and modules.  I’ve done my best to translate the patents so everyone can understand the key takeaway.  I’m sure the sci-fi team at GT Advanced Technologies will give a cleaner explanation but this is my best shot!  Essentially GT has patented a new process that likely creates the lowest cost, thinnest and most efficient solar cell technology on the market   The process to create this amazing innovation begins by leverage GT’s Hyperion technology (which is protected by over 50 patents) to fire hydrogen ions against a solar cell to create super thin solar cells that can be used in PV technology (solar panel).   The super thin solar cells are more efficient due to design (cutting angle) allowing them to improve efficiency.  They are lower cost due to Hyperion exfoliating abilities which allow for one of if not the thinnest solar cell produced in the industry (I hope the analysts ask if TG doesn’t tell us anyways).  Further cost reductions are found because the Hyperion method of exfoliating the solar cells reduces waste that results from through traditional “kerf” methods.

Obscure Analyst’s Spoiler Alert Takeaway: GTAT may have just come up the most efficient solar cells available on the market today due to the degree of the cut plane of the solar cells which allows for more light absorption than traditional methods.  The cost of the solar cells is greatly reduced because Hyperion allows up to a 2 for 1 benefit on thinness (current benefit might be 1.75 to 1) but it was 2:1 when GTAT acquired Twin Creeks in 2012.   Lastly, the method of using Hyperion versus traditional kerf methods of cutting solar cells will greatly reduce the amount waste, which will lead to further cost savings.  If I had to put names on who they are partnering with I would go with Yingli Green Energy or Trina Solar, who finished 2013 as #1 and #2 in PV supply.  Below are two of GTAT’s  key patents related to the growth and bonding of thin lamina.

 
EPITAXIAL GROWTH ON THIN LAMINA 

BACKGROUND OF THE INVENTION

[0001] Sivaram et al., U.S. patent application Ser. No. 12/026,530, “Method to Form a Photovoltaic Cell Comprising a Thin Lamina,” filed Feb. 5, 2008, owned by the assignee of the present invention and hereby incorporated by reference, describes fabrication of a photovoltaic cell comprising a thin semiconductor lamina formed of non-deposited semiconductor material. Using the methods of Sivaram et al., photovoltaic cells, rather than being formed from sliced wafers, are formed of thin semiconductor laminae without wasting silicon through kerf loss or by fabrication of an unnecessarily thick cell, thus reducing cost. The same donor wafer can be reused to form multiple laminae, further reducing cost, and may be resold after exfoliation of multiple laminae for some other use.

[0002] Referring to FIG. 1A, in embodiments of Sivaram et al., a semiconductor donor wafer 20 is implanted through first surface 10 with one or more species of gas ions, for example hydrogen and/or helium ions. The implanted ions define a cleave plane 30 within the semiconductor donor wafer. As shown in FIG. 1B, donor wafer 20 is affixed at a first surface 10 to receiver 60. Cleaving is most easily achieved by heating, for example to temperatures of 500 degrees C. or more. Referring to FIG. 1C, lamina 40 is heated and cleaves, or exfoliates, from donor wafer 20 at cleave plane 30, creating second surface 62. It has been found that the step of implanting to define the cleave plane may cause damage to the crystalline lattice of the monocrystalline donor wafer. This damage, if unrepaired, may impair cell efficiency. A relatively high-temperature anneal, for example at 900 degrees C., 950 degrees C., or more, will repair most implant damage in the body of the lamina.

[0003] In embodiments of Sivaram et al., additional processing before and after the cleaving step forms a photovoltaic cell comprising semiconductor lamina 40, which is between about 0.2 and about 100 microns thick. In other embodiments of Sivaram et al., lamina 40 may be, for example, between about 0.2-50 microns thick, between about 1-20 microns thick, between about 1-10 microns thick, between about 4-20 microns thick, or between about 5-15 microns thick, though any thickness within the named range is possible. FIG. 1D shows the structure inverted, with receiver 60 at the bottom, as during operation in some embodiments of Sivaram. Receiver 60 may be a discrete receiver element having a maximum width no more than 50 percent greater than that of donor wafer 20, and preferably about the same width, as described in Herner, U.S. patent application Ser. No. 12/057,265, “Method to Form a Photovoltaic Cell Comprising a Thin Lamina Bonded to a Discrete Receiver Element,” filed on Mar. 27, 2008, owned by the assignee of the present application and hereby incorporated by reference. Alternatively, a plurality of donor wafers may be affixed to a single, larger receiver, and a lamina cleaved from each donor wafer.

0004] In summary, the primary stages of producing a lamina are ion implantation, exfoliation (cleaving the lamina from the donor wafer), and annealing (to repair defects in the lamina).


BONDING OF THIN LAMINA

BACKGROUND

[0002] Sivaram et al., U.S. patent application Ser. No. 12/026,530, “Method to Form a Photovoltaic Cell Comprising a Thin Lamina,” filed Feb. 5, 2008, and issued as U.S. Pat. No. 8,481,845, owned by the assignee of the present disclosure and hereby incorporated by reference, describes fabrication of a photovoltaic cell comprising a thin semiconductor lamina formed of non-deposited semiconductor material. Using the methods of Sivaram et al., and others, photovoltaic cells and other electronic devices, rather than being formed from sliced wafers, are formed of thin semiconductor laminae without wasting silicon through kerf loss or by fabrication of an unnecessarily thick cell, thus reducing cost. The same donor wafer can be reused to form multiple laminae, further reducing cost, and may be resold after exfoliation of multiple laminae for some other use. Methods are needed for handling thin lamina in order to process them into electronic devices.

SUMMARY

[0003] Methods and apparatus are provided for bonding a thin lamina to a carrier, the methods may comprise providing a thin lamina wherein the lamina has a first side and a second side and wherein the first side of the lamina is separably contacted to a support plate; providing a first carrier having a first side and a second side and wherein the first side comprises a layer of adhesive material; contacting the second side of the thin lamina to the first side of the first carrier; fixing the lamina to the first carrier wherein the fixing comprises applying a first application of heat and a first application of pressure to a portion of the lamina and the first carrier; removing the support plate; applying a second application of heat and a second application of pressure to the lamina and the first carrier wherein the second application of heat and the second application pressure promotes an adhesive bond between the lamina and the first carrier and wherein the second application of pressure comprises moving the lamina, the first carrier and the cover sheet between a pair of rollers.

Two additional relevant patents are below

Photovoltaic Cell Comprising A Thin Lamina Having A Rear Junction And Method Of Making 
ASYMMETRIC SURFACE TEXTURING FOR USE IN A PHOTOVOLTAIC CELL AND METHOD OF MAKING 

The Obscure Analyst’s Analyst Report takeaway :

My Final Closing Thoughts:  I am very disappointed in the lack of research and analytics that went into these reports with the exception of Credit Suisse and UBS.  My brother-in-law jokes that I am the “couch” analyst, because he knows that’s where I do all my research.  In closing, I wanted to reference to one of my favorite movies, Good Will Hunting, because one scene in particular resonates very well right now.  Will Hunting (played by Matt Damon) was obviously brilliant and but he was working as a janitor at MIT and he kept solving the MIT professor’s math problems that not even the MIT students could understand them.   If you recall during one of the bar scenes, Will Hunting was vying for the attention of a young college co-ed and he was competing against a 1st year grad student named Clark.  Will and Clark starting a heated debate on history, a test of wits.  Will’s perfectly fitting retort to Clark:


"You got that from Vickers.  Work in Essex County, page 98, right? Yeah, I read
that, too. You gunna' plagiarize the whole thing for us? Do you have any thoughts
that...of your own on this matter? Or do you-- is that your thing? You come into a
bar, you read some obscure passage, and then pretend you, you..pawn it off as your 
own..as your own idea...." 
 

I think it’s time the analyst community comes up with some original thought of their own rather than taking GTAT’s guidance as gospel and pawning it off as their own idea.  Will Hunting received his education for free at the public library, in this regard I am just like Will Hunting.  I conduct my own research using the tools and information that are available to the public.  At times it can be a painful act, but in the end you are handsomely rewarded with information and enough support to connect the dots and come up with your own original idea.  But hey what do I know?  I’m just the Obscure Analyst!

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

Matt Margolis 2/23/14

Below are my top 10 items to watch for from GT Advanced Technologies during their 2013 Q4 conference call, scheduled for tomorrow morning at 8AM ET.  I omitted any prediction related to Q4 2013 results, because the real focus in 2014 is on delivering the goods to Apple and cultivating the all the “seeds” in the pipeline to make sure they are ready to bear fruit by the start of 2015.  I also went out on a limb and put out some bold predictions in #9 and #10, because I believe a nice “BIG” surprise might be coming as soon as tomorrow morning from GT Advanced Technologies!

#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.

#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.

#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.

#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.

#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 buildout of their plant by 2H 2014.

#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.

We expect our pace of development with Hyperion to accelerate as we now have our pre-production generation tool in operation. This tool is protected by over 50 issued and pending equipment and process patents and we believe this tool is the first of its kind in the world.

#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.

#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)

Based on our current plans and inclusive of restructuring costs, we now expect total operating expenses in the range of $185 million to $190 million which includes a higher level of R&D in the range of $83 million to $88 million as we have invested additional dollars toward accelerating generational improvements to our ASF platform.  Our fiscal ’13 CapEx is expected to be approximately $10 million to $12 million, the bulk of which is being directed at new technology investments.

#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?

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.

GT’s Comments on Cash Levels during the Q3 2013 Conference Call While we are confident that our projected cash levels are adequate to run the business for the foreseeable future, we regularly review financing alternatives to ensure we can support new technology developments and diversification initiatives.

#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”.

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”.

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”. 

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”.

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

Matt Margolis

GTAT’s Secret Weapon – Hyperion Ion Implanter

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GT Advanced Technologies acquired Twin Creeks Technology late in 2012 and one of their first primary focuses was to “to pursue the development of thin sapphire laminates for use in applications such as cover and touch screen devices”. The Hyperion ion implanter machine acquired from Twin Creeks can cut ultra thin wafers (25 microns thick) out of silicon, silicon carbide, sapphire, germanium and other crystalline materials. How thick is 25 microns? The laser sliced sapphire home buttons on the iPhone 5s measure 170 microns thick, which is nearly 7 times the thickness of the sapphire laminates that can be sliced by GT’s Hyperion. The Hyperion machine takes a thick block of crystalline sapphire, blasts it with hydrogen ions and carves a 20 micron layer thick of sapphire from the block. The process is repeated over and over until the block is completely separated. As of last November GT expected the pace of the development with Hyperion to accelerate as their current tool was in the pre-production phase.  Hyperion is targeted to be commercially ready in 2014 and will be used across several of GT’s product lines including sapphire for consumer electronics, sapphire for LED, Silicon Carbide (SiC) as a  semiconductor and thin wafers for solar applications.

Here is the amazing Video of Hyperion in Action from 2011.  GT has spent millions in R&D to advance this technology further but this will give you just a sneak peak of what this giant laser can do.

GT’s management outlined some of the benefits when they purchased Twin Creeks Technologies.

GT expects that Twin Creeks’ unique Hyperion™ ion implanter technology will have broad application in the production of engineered substrates for power semiconductors and thin wafers for solar applications. In addition, GT expects to pursue the development of thin sapphire laminates for use in applications such as cover and touch screen devices. The Hyperion ion implanter has the potential to minimize, or in some cases eliminate, the need for wafering saws, which would significantly lower the cost of production.

The assets acquired by GT relate primarily to the Hyperion ion implanter as well as Twin Creeks’ portfolio of approximately 30 granted US patents and over 70 pending US and international patent applications. GT’s ion implanter engineering team will be based in Danvers, MA.

“Hyperion’s unique ion source and beamline design will enable a wide range of exfoliation applications in markets where thin silicon, silicon carbide, sapphire, germanium and other crystalline material substrates can enable breakthroughs in performance and cost,” said Vikram Singh, executive vice president of advanced systems development. “Hyperion will enable the production of high throughput and optimum thickness substrates that can not be achieved with other ion implant technologies.”

Additional technical information Courtesy of Gigaom is below:

The machine, called Hyperion, creates silicon wafers at 20 microns thick, compared with the typical 200 microns, said Siva Sivaram, CEO of Twin Creeks. Being able to use the same amount of silicon to make more cells means a cut in capital equipment cost, which is measured in cents or dollars per watt. Putting Hyperion to work could reduce the capital equipment expenditure by 50 percent for a vertically integrated company, which makes everything from silicon to solar panels, Sivaram said. Using Hyperion in a large factory — that  means 100 MW of annual production capacity or more — will lead to a cell production cost of 40 cents per watt, he said.

Twin Creeks takes a thick block of silicon and put it in Hyperion, which bombards the silicon block with hydrogen ions down to the depth of 20 microns. The ions in effect create a bubble layer, and when the wafer is moved to a furnace and heated, the bubble expands and separates the 20-micron top layer from the rest of the silicon block. The remaining silicon block is then used again and again. “The only way we continue to get more value is for those materials to become more productive,” Sivaram said.