Posts Tagged ‘iphone6’

  • Installed furnaces inside Mesa, AZ are estimated to exceed 2,500 tools
  • Apple Base Case Revenue likely to exceed $2B and $2.00 EPS
  • Sapphire boule size are estimated to approach 235 kg

GTAT is still waiting on the 4th and final prepayment is received from Apple. The delay in the receipt of the final prepayment is believed to be related to the ramp up of equipment of equipment inside the Mesa facility. The sapphire plant is expected to be completed in June, which should coincide with the receipt of the final prepayment from Apple.
 
My latest supply chain check indicated that GT has likely installed slightly more than 2,500 furnaces. Sapphire boule size is expected to range between 200 and 235 kg. Stephen Chin of UBS has been one of the most vocal analyst’s covering GTAT issued a note on May 28th related to the progress of GT’s sapphire operations in Mesa, AZ.
 
The UBS research note issued on May 28th indicated that any installed furnaces greater than 1,500 or boule size greater than 165 kg would likely result in an upside to its 2015 estimates of $1.30. UBS stated, “we believe 2015 has more chance for upside if the furnaces are indeed larger sized and there are more than we estimated.” My supply chain check indicates that the number of installed furnaces will be significantly larger than 1,500 and sapphire boule sizes will also be significantly larger than 165 kg, which will lead to major upgrades across the board from Wall Street analysts in the near future.
 
As a result of my most recent supply chain check I believe that the Mesa sapphire operations will have an ample supply to cover the iWatch, the 4.7” iPhone and the 5.5” iPhone with full sapphire cover glass in 2014. Additionally, the maximum sapphire screen capacity of the Mesa facility is likely to exceed 200m annual units. My most recent supply chain check confirms that GT’s sapphire business with Apple is likely to approach or exceed $2B annually, or $2.00 earnings per share using an estimated ASP of $10 per unit.
 
Current Wall Street models are only pricing in Apple business at $1b annual or $1.00 earnings per share. My latest supply chain check indicates that Wall Street will likely need to DOUBLE revenue, EPS estimates and price targets once the iPhone 6 and iWatch are released later this year covered in sapphire glass.
 
I am maintaining my $87.50 price target as well as my 2015 estimate for GTAT EPS at $2.84 based on $3.177B in sales, including just over $2B of sales from Apple versus $1.335B and $1.30 EPS currently being estimated by UBS.

Get in early and enjoy my top investment picks.

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by Matt Margolis

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

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

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

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

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

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

 

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Mesa Facility Module Sizes and Stages

Module 1 – 12,500 square feet

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

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Modules 2 – 12,500 square feet

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

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

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Module 3 – Size N/A

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

Module 4 – 163,483 square feet

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

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

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Below are some interesting building permit descriptions and timelines

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

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

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

 

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

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

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

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

 

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

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

 

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

 

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

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

 

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

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

 

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

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

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

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

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

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

 

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

 

Additional evidence details Apples approval to begin production in module 1 of the Mesa, AZ sapphire facility.

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Filip Truta is reporting that a French site has gotten a hold of leaked documents that detail the 4.7″ and 5.5″ iPhones. The leak alleges that the iPhones will come in 2 version N56 and N61 models 402/401 and will have sapphire covering the front and back of the device. This development if it is indeed true opens the door up significantly for other options including solar charging. I’ve followed Filip’s work for a while and this isn’t the first time he brought up the idea of Apple returning to a double sided glass iPhone and it only makes sense if sapphire is going to be used.

http://news.softpedia.com/news/iPhone-6-Could-Be-Double-Plated-with-Sapphire-Crystal-Back-and-Front-435134.shtml

Original French source

http://www.nowhereelse.fr/iphone-6-air-croquis-95945/

Leaked Image of Schematics can be found here

http://cdn.ndtv.com/tech/assets_c/2014/04/apple_iphone_6_macfan-172355.html

The talented Martin Hajek, tapped by the Frenchies at Nowhereelse.fr (who obtained the leaked documents), has created a few mockups based on the purported schematic. He achieved the image displayed above (click to enlarge).

“…assuming that the illustrations below are true, the iPhone 6 would be declined in two versions (N56 / N61 and 402/401 models) respectively equipped with a screen of 4.7 inches and 5.5 of diagonal,” according to the French site.

“Visibly thinner than the current iPhone 5s (7.1mm thick according to my source), first note that the edges of the iPhone are slightly curved unlike those of previous generations with four slices were flat,” reads a rough machine translation of the report.

Matt Margolis – 2/21/14 (I am long GTAT and have no plans to buy or sell any holdings in the next 72 hours)

Courtesy of JP Morgan research sapphire ingot maker STC (Sapphire Technology Company), who doubled their capacity last fall to meet expected demand for applications of sapphire glass does not expect to make any sapphire screens for Apple.

Also, STC is expected an unseasonal 2Q2014 boost in demand versus 1Q2014. There is no reason for STC to expect a demand boost unless a new Apple product is being released during Q2 or early Q3.

The Obscure Analyst’s takeaway, GTAT will be producing 100% of Apple’s sapphire screens while the existing sapphire component makers (lenses and home buttons) will continue to fill components contracts. The anticipated uptick in STC 2Q2014 demand suggests that one Apple’s iPhone 6 releases might occur in June instead of September. Stay tuned!

Below is the note from JP Morgan Research

1Q14 is the bottom in 2014 – According to STC management, after a seasonal correction in Apple iPhone orders, STC sees 2Q14 demand being stronger than 1Q14. The comment contradicts a normal seasonal pattern in Apple’s iPhone shipment; we suspect this is due to an earlier preparation for iPad home buttons.

Setting a realistic expectation on sapphire iPhone cover – The management did not try to paint a rosy picture on business opportunities from iPhone covers. The management does not expect STC to participate in the first batch of iPhone sapphire cover production (if any in 2014), but the management remains confident that if Apple chooses to do this in the future, STC could still be a strong candidate and cost-effective producer for Apple or non-Apple smartphone customers.

No fund-raising plan unless sizable new business opportunities are secured – The management is content with the existing capacity and shows confidence in maintaining the majority of market share in existing items such as sapphire for home buttons. Even if there are sizable new business opportunities, STC will aim to finance it through advanced prepayments/loans from customers as first alternative. The company also will try to reduce the dependence on a single customer by increasing customer diversification.

Rubicon comment on pricing trend reaffirmed our view – Rubicon (RBCN.US, covered by Paul Coster) reported 4Q13 results on February 20, 2014, which was in-line with expectations. 1Q14 revenue guidance also aligned with market expectation. Rubicon management commented that its 2-4” cores are fully utilized and pricing is expected to resume its upward trajectory in 2Q14 following seasonal weakness in backlighting in 1Q. Of note, STC demonstrated more than 10% OPM in 4Q13 while Rubicon reported -78% OPM. STC’s 4Q13 revenue was ~USD21mn vs. Rubicon’s at USD11.5mn

I love when you get tomorrow’s news today.  A new report out of the South China Morning Pos is a 100% contradiction of the gforgames report that emerged early this afternoon with headlining that Apple’s next iphoine is highly unlikely to have a sapphire display due to skyrocketing costs.  The only similarity between the articles is that Angela Meng  does also mention that the cost is far more expensive than Gorilla Glass.  Angela seems very confident that the Iphone 6’s will arrive in September featuring a 4.7 inch and a 5.5 inch sapphire display .  I hope she is right.

App developers need to be poised for a redesign because Apple’s iPhone is getting bigger.

The tech giant will roll out the iPhone 6 in two sizes – 4.7 inch and 5.5 inch – in September, according to industry insiders who have seen the prototypes.

The new iPhone screen will be made entirely from scratch-resistant sapphire crystal glass, they said. Sapphire crystal, second to diamond as the hardest material, is now used by Apple for its iPhone camera lens cover and touch identification.

It will also sport a new display at 441 pixels per inch (ppi), the same as the Samsung Galaxy S4. The highest definition Apple now offers has only 326 ppi.

“They have to tackle the phablet [devices that serve as both phone and tablet] market. People want bigger screens now,” one insider said.

The iPhone 5S, Apple’s largest phone at 4 inches, is notably smaller than the S4, which measures 5 inches, and the Galaxy Note 3, with a 5.7 inch screen.

Last week, Apple repurchased US$14 billion worth of its stock after announcing disappointing first-quarter results.

The company originally said it intentionally kept the screens small to fit comfortably in a user’s hand. Since then, the iPhone 5C has suffered poor sales numbers, its competitors have more or less all upgraded to larger devices, and China, the world’s largest smartphone market, has been rapidly snatching up Samsung phones.

According to the two insiders, the 5C will be gone while the 5S will stay but be made from cheaper material.

Despite widely circulated rumours that the new phone will be curved, insiders say the iPhone 6 will have a flat screen.

“The screens will be flat. Apple doesn’t do anything until Samsung does it, and then they improve upon it,” another insider said.

The arrival of sapphire means a dramatic increase in the cost of making an iPhone, as sapphire is far more expensive than the present Gorilla Glass, but it remains unknown whether the price of a single iPhone will go up.

The design “freeze” for the iPhone 6 – after which no changes will be made – is set for April this year, they said.

Apple Loop – covered by Forbes

Posted: February 11, 2014 by mattmargolis24 in Mesa Sapphire Plant
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Great article published by Forbes written by Connie Guglielmo, highlighting recent news on sapphire screen production capacity (100-200m screens), Apple capital expenditures and iWatch Unit/Sales Forecast (58m/$17.5B) over first 12 months of product launch.