Posts Tagged ‘Mesa Sapphire Plant’

According to the Engineering News-Record, the Mesa, AZ sapphire the majority of the project work has been completed and the project is finishing up now. The facility work began in November and was completed by 400 members of the International Brotherhood of Electrical Workers 640, who worked double shifts for seven days a week to complete the project. Additionally, the article does reference that the Mesa site was declared a free-trade zone, which will eliminate the ability to track shipments coming out of Mesa through customs.

“They started back in November and have been working two shifts, seven days per week,” says Roy Hamilton, business manager for the International Brotherhood of Electrical Workers 640. “We had about 400 members out there, but most of the work is finishing up now. The furnaces that melt the silicone and turn it into the sapphire glass need an enormous amount of electrical power, much more than the solar-panel process needs.” He adds, “SRP had to build two new switchyards for this project—that’s how much power it’s going to use.”

Apple says the Mesa project will create 1,300 construction jobs. The United Association of Plumbers and Pipefitters 469, Phoenix, says the fast-track job means work for 200 or more of its members for the rest of 2014. Work includes “installation of condenser water systems, chiller water systems and inert-gas systems [entailing] the use of 48-inch pipes down to six-inch pipes,” said a union spokesman.

In addition, the Mesa site was declared a free-trade zone, so goods can be shipped and received internationally without oversight from customs agents.

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

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

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

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

· Sapphire cover screens margins expected to be around 25%

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

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

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

by Matt Margolis

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

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

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

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

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

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

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

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

Position Summary

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

Required Experience

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

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

 

Expertise

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

Excellence

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

 

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

As promised here are the latest pictures that were taken April 28th and April 29th of the Apple/GT Advanced sapphire plant located in Mesa, AZ.  The official name of the sapphire operation is “Project Cascade”.  The outside of the building including the crucial power supply to the building including the cooling system looks complete.

 

Steam Above Cooling System 6:30 AM on 4/28

first signs of steam

 

Employee Entrance “GT Advanced Technologies”

employee entrance 2 employee entrance

Solar Arrays outside of Parking Lot

solar arrays and parking solar arrays and parking2

solar arrays and parking3

Employee Parking lot 7:00 AM and 10:30AM local time (looks crowded)

Parking lot 7am  parking lot 1030

Parking lot 7am 2

Electrical Substation

Electrical Substation Electrical Substation3 Electrical Substation2Electrical Substation4

Cooling System on Back End of Electrical Substation

Cooling System Connection to Building cooling system 4 cooling system3 cooling system1 cooling system2

 

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

 

 

 

 

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A photo taken today and shared with me an hour ago clearly indicates steam is coming out near the cooling systems by the electrical substation. Eye witness account indicated that the parking lot was very full overnight and a flock of employees arrived at 6am for work this morning. The eye witness also counted 21 sets of 3 phase electrical lines powering the facility.

This is the best evidence yet that the Mesa Sapphire facility is “full steam ahead” and is up and running and producing sapphire around the clock.

I had previously indicated that the Mesa sapphire plant was likely operating at or near full capacity by the end of March, just weeks after being granted approval to being full operations on 3/19/14 by the Federal Trade Zone (FTZ).

I will have additional images to share later.

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

by Matt Margolis

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

Look back to 2013

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

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

Conclusion

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

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

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

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

 

 

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

by Matt Margolis

Thanks again to my street analyst that provided pictures of the exterior building that were taken this morning on 4/10/14.  My street analyst also took pictures on 2/16/14 so I can have some fun comparing the images to show the significant progress that has been made in just under 2 months.

  • Line of solar arrays have been installed on the North-side of the building and you can notice the reflection from the sun on the building all around the 3740 BLD-1 sign
  • 2 Huge water storage tanks, massive cooling tower system and large electrical station appear to be completed
  • 100 foot long and 75 foot high pile of dirt near the large electrical station is gone since 2/16/14 and the large crane has moved
  • On the northwest side of the building there appears to be an extremely large generator along with some piping that goes into the building and directly into the ground.
  • The parking lot was full and trucks and golf carts were racing around the building hurrying to get work done.
  • The city of Mesa is in the progress of expanding the main roads leading up to the plant from 2 lanes across to 4 lanes across.
  • A significant amount of large spools of electrical cable that were partially used were seen on the ground outside of the building.
  • The north side of the building seems almost complete as it has been landscaped.

Below are the 2/16/14 and the 4/10/14 images of the West Exposure as well as the closeup of the electrical station that is between the crane and the water towers in the 4/10/14 image

Electrical Station 4/10/14

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4/10/14 West Exposure Electrical Station, Cooling Tower System and Water Storage Towers

  • White long building is new and has been completed since 2/16/14  just under crane

  • Black structure to the right of water storage power has been completed

  • Electrical Station has been completed

  • Piping connected to water storage for cooling system is now complete

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2/16/14 West Exposure Electrical Station, Cooling Tower System and Water Storage Towers

  • Incomplete electrical station

  • Incomplete piping from water storage towers

  • Massive 100 foot long and 75 foot high dirt pile

  • Crane outside of water towers has now moved

  • Next to water storage (right) is another structure which is incomplete but has been completed on 4/10/14 photo

 

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Solar Arrays Installed on North Side (notice reflection on building and solar arrays up close to building

April 10 Northside Solar Arrays April 10 Northside Solar Arrays Image 2

Northwest Exposure – Large Generator and Piping Entering Building and connected to the ground

Northwest Piping and Generator

 

Northern Exposure Looking Complete on 4/10/14

2/16/14 (Left) versus 4/10/14 (Right)

 

Feb 17 Northern ExposureApril 10 Northern Exposure

Parking lot looking Full on 4/10/14.  

2/16/14 (Left) versus 4/10/14 (Right)

Feb 17 ParkingApril 10 Parking

Extra Electric Cables Everywhere and large piping (4/10/14)

Extra Electric Cables Extra Electric Cables 2

 

West Side Rock Truck Frenzy (4/10/14)

April 10 West Truck Derby

Elliot Road Landscaping Looking Complete (4/10/14)

Elliot Road Landscaping

 

 

 

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

 

by Matt Margolis

On January 29th 9to5mac broke news that Apple that was aggressively pushing to take the sapphire plant live in February for ‘critical’ component. 9to5mac published Apple’s Production Notification Application for the Foreign-Trade Zone No. 221 for “Project Cascade” in Mesa, AZ.  As highlighted by 9to5mac the intent of Project Cascade was to conduct high-tech manufacturing for intermediate goods/components for consumer electronics.  This high-tech manufacturing process was set create a critical new sub-component of Apples Products to be used in the manufacture of the consumer electronics that will be imported and sold globally.  Additionally, Apple’s production notification application indicated that Apple had an aggressive go-live timeline of February 2014.  Apple’s Production Notification Application dated 12/30/13 can be found in the images below:

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Apple Granted Approval Limited Go-Live on January 14, 2014 and C-of-O to begin Production with 140 Tools

The latest documents pulled from the Foreign-Trade Zone indicate that Apple’s approval to establish Subzone 221A was approved on January 14, 2014.  The Foreign-Trade Zone approval indicates that the approval is subject “to the existing activation limit of FTZ 221, on behalf of Apple Inc//Gt Advanced Technologies Inc., in Mesa, AZ”. The approval also states that, “Pursuant to the authority delegated to the FTZ Board Executive Secretary (15 CFR Sec. 400.36(f)), the application to establish Subzone 221A is approved, subject to the FTZ Act and the Board’s regulations, including Section 400.13, and further subject to FTZ 221’s preexisting
activation limit.”

The approval indicates that the approval is subject to FTZ 221’s preexisting activation limits, which indicate that only a phase of the plant was granted approval to “go-live”.   The sapphire plant has most likely producing sapphire within a specific sapphire growth furnace activation limit subject to the “FTZ 221’s preexisting activation limit.”  Additionally a temporary permit was issued on January 10, 2014 for “Quick Start 140 Area” to commence production of 140 tools (furnaces) for Module 1. The facility lease agreement between GT Advanced Technologies and Apple Inc does indicate that the Mesa sapphire facility will have 9 designated phases.  It is likely Apple and GT Advanced were granted approval to go-live within one of the 9 phases referred to in the facility lease agreement.

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Foreign-Trade Zone Notice of Approval for Subzone 221 in Mesa, AZ

On January 14, 2014, the Executive Secretary of the Foreign-Trade Zones (FTZ) Board docketed an application submitted by the City of Mesa, grantee of FTZ 221, requesting subzone status subject to the existing activation limit of FTZ 221, on behalf of Apple Inc./GT Advanced Technologies Inc., in Mesa, Arizona.

The application was processed in accordance with the FTZ Act and Regulations, including notice in the Federal Register inviting public comment (79 FR 3778, 01/23/2014). The FTZ staff examiner reviewed the application and determined that it meets the criteria for approval. Pursuant to the authority delegated to the FTZ Board Executive Secretary (15 CFR Sec. 400.36(f)), the application to establish Subzone 221A is approved, subject to the FTZ Act and the Board’s regulations, including Section 400.13, and further subject to FTZ 221’s preexisting activation limit.

Below is also a copy of the temporary C-of-O for Quick Start Area 140 issued on 1/10/14

Dated: March 19, 2014

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by Matt Margolis

My unique research style includes sifting through various public information including articles, social media and the latest from the street.  I stumbled upon a very interesting article last night by accident while I was laser focused on finding something else.  I actually attempted to duplicate my search and find it a second time but was unsuccessful,  thank goodness for web browsing history.

Canaccord Genuity Conference August 17, 2012

The article dates back to August 18, 2012, which happens to be the next day following the Canaccord Genuity conference that was hosted on Friday August 17, 2012.  For the long-term shareholders they will remember this conference and the infamous upgrade from Canaccord Genuity’s analyst Jonathan Dorsheimer, who cited GT management’s body language regarding sapphire smartphone cover glass.  Jonathan’s note regarding the upgrade as reported by the Street.com is below:

“We are upgrading GTAT shares on increased buzz around potential smartphone applications…We believe that the smart phone cover “glass” opportunity for sapphire is becoming closer to reality based on our work in the supply chain and GT management’s body language.”

As it turned out, Jonathan was wrong on timing and the sapphire smartphone cover glass opportunity was not as close as he first thought.  But my biggest question is what did the Canaccord analyst notice from GT management’s body language.  I am the first to admit that there is tremendous value gained by observation and sometimes a person’s body language tells more of the story than the actual words spoken.

The August 18, 2012 Article

The August 18, 2012 article that might hold the key detail behind the Apple contract was published by Gulfnews.com.     The article is short and sweet and it covers the Canaccord Genuity conference.  The Canaccord Genuity conference was not focused on sapphire but focused on GT’s investment into continued growth and diversification (Sounds a lot like their Technology Conference in March!). The specific quote from the Gulfnews.com article is below,

Sapphires may replace glass on mobile phones and tablets, chief executive officer Thomas Gutierrez said at a Canaccord Genuity conference on Friday. GT Advanced, which makes tools to grow sapphires, has sought non-solar applications for its technology as a global glut of panels reduced demand for systems that make polysilicon and photovoltaic wafers, Gutierrez said in May.

GT’s CEO Tom Gutizerrez indicated on August 17, 2012 that sapphire may replace glass on not only mobile phones but also tablets.  I know what you are thinking right now.   Why would this have anything to do with Apple?  GT’s CEO made a generic statement why would this hold the key to the Apple deal?

The Power of the Mind and the Body

I think it’s very important to understand the context behind TG’s comment made on August 17, 2012 during the Canaccord Genuity Conference.  Why would TG say, “Sapphires may replace glass on mobile phones and tablets.”  Why would Canaccord’s analyst upgrade shares of GTAT based on “GT management’s body language” surrounding the sapphire cover glass opportunity?

In order to fully understand Canaccord’s comment and put some context behind TG’s comment I needed to find something that would explain what could possibly be going on with GTAT at the time of this conference.  TG has always been confident so he must have had his normal swagger and then some during this conference back in August 2012.  I believe the answer to this riddle, of the mind and the body was hidden in plain view, within a key document that would be released to the public 15 months later.    On November 4, 2013 GT Advanced Technologies and Apple announced a sapphire deal but the answer to this riddle lies within the Master Development and SOW agreement, which was signed on October 31, 2013.   As you can see from the image below, GT Advanced Technologies and Apple signed their confidentiality agreement on August 24, 2012.

The plot is now beginning to thicken as the dots get connected.  If we put ourselves back in time knowing that GT was in the midst of signing the confidentiality agreement with Apple for sapphire cover screens it would make a lot more sense why GT’s management could not withhold their excitement.  The sapphire cover screen was one of the primary focuses for GT’s management and they were going to be handed the key to Apple’s device empire.  Based on additional information provided from the Q3 2012 Conference Call GT hah been working closely with Apple for several months on sapphire cover screens.  According to GTAT, we have already gone beyond, “the NDA stage, we’ve delivered furnaces. We’ve delivered material now. We’ve delivered sample screens, actually, in some cases. And so it’s gone well beyond”.

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Q3 2012 Conference Call Transcipt

The last major spoke that spins this wheel can be found inside the Q3 2012 conference call transcript.  The conference call was held on November 7, 2012 just 11.5 weeks after GT signed the confidentiality agreement with Apple.  The biggest question is how will GT’s management handle the recent development with Apple and what will they say about the sapphire cover screen opportunity?  I have read this transcript numerous times but putting the Canaccord Genuity Conference body language, the comments made during the Canaccord Conference and the fact that GT and Apple signed the confidentiality agreement in August  just  a week after the conference might give you the chills.  The bullet points below came from GTAT’s Q3 2012 conference call transcript and can be read for free in its entirety at Seeking Alpha.

  • #1 High-volume, scalable, low-cost sapphire production is now possible with the commercial availability of our technology, and breakthrough fabrication technologies have and will continue to drive out significant costs.
  • #2 While we’re not able to reveal all of the details behind our published range due to customer and partner sensitivity, here are some important points to consider.
  • #3 This does not reflect the other significant cost reductions that we believe can be achieved as we further optimize the ASF growth process for this application through adjustments, such as optimized boule size, shorter cycle times and lower cost consumables.
  • #4 There are some really innovative technologies that are being developed by ourselves and our fabrication partners that would bring the back end down very substantially in the fabrication area.
  • #5 As a result of these factors and several other proprietary data points that we’re not able to share, we are confident that the cost targets are achievable and acceptable.
  • #6 And unfortunately, with the big smartphone players, you won’t know until it happens.
  • #7 And that’s what they’re all about, it is out-surprising each other.
  • #8 We’ll start laying down assets second half of next year, but you won’t see a high-volume phone with sapphire on it, I don’t think, until 2014
  • #9 I think the other thing that’s gone beyond the NDA stage, we’ve delivered furnaces. We’ve delivered material now. We’ve delivered sample screens, actually, in some cases. And so it’s gone well beyond, “Let’s sit in a room with an NDA and talk about it.”
  • #10 There’s been a lot of discussion regarding the cost of sapphire for cover screens and question as to whether the cost range that we recently published of $10 to $20 above current glass solutions is achievable.
  • #11 But we’re confident, okay, that we can be inside that box. And we’re also confident that, that’s just the initial box, okay.

I want to address some of the bullet points and provide even more evidence that sapphire screens are coming to the iPhone and iPad and likely across everything else Apple makes.

 

Bullet #1  GT cites that, “High-volume, scalable, low-cost sapphire (screen) production is now possible with the commercial availability of our technology“.  This comment is nearly identical to the press release (see below) from GT Advanced announcing the Apple contract.  The language might be ambiguous but the statement is nearly identical to the Q3 2012 discussions related to sapphire cover screens.

GT has accelerated the development of its next generation, large capacity ASF furnaces to deliver low cost, high volume manufacturing of sapphire material.

Bullet #4 Innovative Fabrication Techniques – On September 20, 2012 Apple filed for their “Multi-Step Cutting Process” patent.  The patent covers Apple’s laser cutting techniques, which is an extremely innovative fabrication technique and was filed between the signed confidentiality agreement and GT’s Q3 2012 conference call.

Bullet #6 Big Smartphone Players – You never know when it happens and they like to suprise each other.  This sounds very similar to the comments TG made during his appearance on Fast Money on CNBC when asked by the host of the show when sapphire would start showing up.  Interesting!

Bullet #8 GT will start laying down assets the second half of year – GT announced during its Q4 2013 results that they deployed $180m of Capital Primarily in Arizona, which was consistent with plans GT announced nearly a year prior to lay down assets for sapphire cover screens production.

Bullet #8 You won’t see a high-volume phone with sapphire on it until 2014 –  The only known customer besides Apple that GT had lined up for sapphire screens was Canonical (Ubuntu Edge) and Apple is the only one of the two companies who would sell high volume phones with sapphire.

Conclusion:

Did GT’s management give away proof through their super confident body language that they were just a few days away from signing a confidentiality agreement, that they knew would lead to a multi billion dollar annual contract with Apple by the end of 2013?

Did TG spill the beans and clearly indicate that GT would be making sapphire cover screens for Apple phones and tablets during the August 17, 2012 Canaccord Genuity Conference?

Did GT’s management change their tune dramatically during the Q3 2012 conference call and shift significant focus on their recent sapphire developments specifically the signed Apple confidentiality agreement and how it would impact their operations in 2013?

Did GT’s management spend nearly half of their Q3 2012 conference call discussing; sapphire cover screens, sapphire NDA’s, cost of sapphire screens, laying down assets a year in advance and  introducing the expected timing of the first high volume sapphire screen?

 

My answer to all of these questions is YES! YES! YES! YES!   How about you?  But hey what do I know, I’m just the Obscure Analyst.

 

If you are interesting in following my tweets, asking me a question or just want to give feedback or say hello you can follow me @sapphirecover24 on Twitter.

 

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