Posts Tagged ‘obscure analyst’

#1 GT will raise 2014 FY guidance to $800m to $1B from $600m to $800m driven by sapphire and equipment sales.  GT will not break down the revenue contribution between ASF equipment and sapphire material sales.

#2 GT will announce another significant PV win in the Middle East.  PV Tech’s Mark Osborne has been tracking a large PV project in the Middle East that was expected to decided before the end of 2013.  To the best of my knowledge this project is still on the table and GT is in position to win this bid.

#3 GT will announce new applications for Hyperion related to solar cells as a result of GT’s develop work with a “well-known” solar cell manufacturer in Asia.

#4 The first high volume sapphire covered phone will be sold.  Although, I believe the iPhone 6 could be announced as early as June there is nothing preventing Apple from launching whenever they feel like it.  90 days from May 7 gives me until August 7th for the first high volume sapphire covered phone to be sold.

#5 GT will announce its first PO for Hyperion, likely headed to the Medical or Military.

#6 GT will announce the first Merlin order (towards the end of my 90 day view).

#7 GT will announce further progress and the commercialization of its composite glass that can be bonded with sapphire lamina.

#8 GT will announce its first “total solutions” order related to Hyperion coupled with ASF furnace and bonding equipment or coupled with a Silicon Carbide furnace and bonding equipment.

GT’s Road Ahead

Below is GT’s 2012 Diversification Road Map.  I would appreciate it if GT provided an updated version to help guide me towards the company’s 2017 and 2018 goals.

As you can see from the chart below on the left hand side above current business, GT has delivered Merlin for module technologies but is still holding out on the solar cell technologies.  It makes complete sense to couple GT’s solar cells and Merlin module technologies together to deliver a charge to the solar industry.



Full Disclosure: I am long GTAT



by Matt Margolis


GT announced a $58.6m Specialty Furnace order that is expected to be booked as revenue in 2H’14 on April 7th.  On April 30th GT announced a series of strategic initiatives to leverage its Hyperion technology.  On May 5th GT announced the release of its next generation ASF furnace that is capable of producing 165kg boules up from 115kg in the previous model.  Additionally, GT announced that they expect to be commercially available in Q3’2014.

Update to Estimate

GT has made several announcements over the past several weeks that forced me to modify my 2H’14 estimates and add Hyperion and Specialty Furnace revenue to my model and increase my estimate for ASF Equipment sales as explained above.  As a result of the recent announcement I’ve modified my 2014 street high revenue from $1.331B to $1.515B primarily driven by 2H’14 equipment sales.  In turn my 2014 EPS estimate is moving up from $0.62 to $0.82 partially driven by increased gross margins, which added $0.06 to my 2014 EPS estimate.  My gross margin estimate is now 26.9% up from 25.8% representing a 1.1% gross margin improvement driven primarily by additional equipment sales expected in 2H’14.

Although, I believe the iPhone 6 may arrive as early as June I have not modified my 2014 estimate to reflect any changes to my current forecast related to sapphire material sales to Apple. I am currently sapphire cover screens unit sales of 88m iPhone 6 units, 30m iWatches and 18m iPods.  It is important to note that my unit Apple sales estimates also include unit sales to Apple to accumulate 1 to 2 months of inventory on hand heading into 2015 for the iPhone 6, iWatch and iPod.

My updated 2014 Revenue and Product Mix Estimate is below

2014 FY Estimate

Previous Analyst Round Table 2014 FY Estimates

Analyst roundtable 2014

GT’s 2015 and 2016 Upside Potential

My 2015 and 2016 estimates do not reflect the likelihood that GT will receive annual follow-up equipment orders related to its Thermal Technology equipment portfolio.

My estimates do not include the impact of Hyperion 4 likely being adopted in volume that is above and beyond my current estimates.  Hyperion will likely be sold within a “total solution” for the growth, processing and bonding of Sapphire lamina.  Hyperion will also likely be sold alongside GT Silicon Carbide furnace to create ultra-thin and relatively less expensive Silicon Carbide wafers.  I expect both of these “total solution” options to begin gaining traction by 2014 and likely significant revenue on top of my 2015 and 2016 estimates.

Apple’s most recent purchase of LuxVue and its patented LED display technology will eventually land inside Apple’s devices and replace Apple’s current display with a more efficient and just as bright LED display, which will also improve the battery life.  The foundation of LED displays are sapphire substrates and GTAT’s sapphire produced in Mesa will likely land inside Apple’s devices for LED displays by 2016.  Lastly, Apple is currently focused on the manufacturing of the iPhone 6 and iWatch, however most industry analysts believe that sapphire cover screens will also end up on Apple’s iPad.  The timing of sapphire cover screen’s addition to the iPad is likely tied to the availability and less tied to the price of the sapphire cover screens themselves.

The last product to watch that will be emerging from GT’s R&D lab is ultra efficient solar cells, including “triple junction solar” cells for consumer electronics.  GT’s super thin and efficient triple junction solar cell is patented and is designed to support consumer electronics.  Apple is currently very interested in extended the battery life of its devices and when Apple does introduce solar charging to its devices, GT will receive considerable consideration to supply the product.

The original focus for Hyperion project while under the direction of Twin Creeks Technologies was to develop ultra thin solar cells to cut the cost per watt to produce solar energy in half.  GT has been referring to the progress made on solar cells with a “well-known” solar cell manufacturer in Asia for quite some time and I expect an announcement will be made shortly on availability and details of the product.

Price Target

I am maintaining my strong buy recommendation on shares of GTAT and a 12 month price target of $87.50 which equates to 17x my 16′ EPS estimate of $5.26 on $4.736B of sales and 31x my 15′ EPS estimate of $2.84 on $3.177B of sales.

Obscure 2014 to 2016


Full Disclosure: I am long GTAT

I wanted to share with everyone some of the items that I am working on in the pipeline. This is my current list but current events always seem to trump my delivery timelines.

Featured Articles in Progress

– TG’s comment that sapphire is coming to phone and tablet
– Apple’s “real” secret inside Mesa
– GTAT’s next $1B market opportunity
– Things you see but aren’t really there
– Sapphire Screen Toughness right from the Pros
– GTAT Analyst Roundup – EPS & Sales
– iPhone 6 spec’s and Timing Roundup
– The most foolish article of the week goes to..
– All this and many more

Keep the questions and suggestions flying in. Together we can uncover, share and learn from “the truth”.

by Matt Margolis

If anyone follows the share price of Micron Technology (MU) I’m sure your first thought might be, “this stock already doubled and almost tripled over the last 12 months.”  The answer is yes the Micron has gone from $9.23 on April 1, 2013 to $23.66  as of today’s close on March 31, 2014 (a whopping increase of 2.56x or 156% over the last 12 months).    I’m going to argue that the supply and demand situation along with the macro economic environment driving the memory industry will drive Micron’s share price up another 156% over the next 12 months.  I am officially initiating coverage on Micron and issuing a $61 – 12 month price target.


What is DRAM?

One of the main types of memory that Micron specializes in is Dynamic random-access memory (DRAM).  DRAM is a type of random access memory that stores each bit of data in a separate capacitor within an integrated circuit. Since real capacitors leak charge, the information eventually fades unless the capacitor charge is refreshed periodically. Because of this refresh requirement, it is a dynamic memory as opposed to SRAM and other static memory.  The main memory (the “RAM”) in personal computers is Dynamic RAM (DRAM), as is the “RAM” of home game consoles (PlayStation, Xbox 360 and Wii), laptop, notebook and workstation computers.


DRAM Consumption

DRAM consumption is driven by Mobile (35%) of the market and Servers (20%) of the DRAM market.  Mobile DRAM consumption will grow at a 60-70% YOY clip in 2014 and server consumption will increase about 40% YOY.   The next significant piece of DRAM consumption is Networking, which represents approximately 10% of the marketplace and that is growing 30-35% YOY driven by LTE build outs in China.  The last piece of the DRAM market is PC’s and that area is growing at a 5% YOY rate at best.  I have only been following Micron for the last 4 years but I have very excited about how Micron is and will continue to be a very big winner in the smartphone revolution that is still in its infancy.

DRAM, the Past, the Present and the Future

Micron’s DRAM business used to be tied to PC sales and PC’s have dominated the DRAM industry consumption since the 1980s but by 2015 Tablets and Mobile devices are expected to consume more DRAM than PCs.  If you don’t this has been a remarkable shift in consumption, then you read to check out the chart below courtesy of IHS Technology.

Screenshot - 3_31_2014 , 8_35_34 PM

Screenshot - 3_31_2014 , 10_10_08 PM

Global mobile smartphone sales just surpassed non-smartphone sales in 2013 with a total market size of 1.8B handsets sold.  A new report published today from IGR estimates that mobile sales will rise from 1.8B to 2.6B units by 2018 and smartphone sales will account for 85% of 2.2B units sold in 2018 up from 0.9B or just over 50% of mobile units sold in 2013, representing an increase of 1.3B annual smartphone unit sales by 2018.  Smartphone sales are forecasted to increase from 900m in 2013 to 2.2B in 2018 representing an annual growth rate of 20%.  On top of the unit growth rate, the amount of DRAM memory bits consumed in smartphones and tablets will continue to increase as mobile devices and tablets become more powerful and continue to perform a larger portion of our computing tasks each day.

The mobile DRAM marketplace is currently dominated by only 3 players, Samsung (48.9%), Hynix (25.9%) and Micron (23%) during Q4 2013.  Samsung is mostly a supplier to themselves and Micron through their acquisition of Elpida has Apple as a mobile customer.  Micron was the #4 player in the DRAM space but after they acquired Elpida for pennies on the dollar they jumped #3 and are currently in a horse race with Hynix for the #2 spot.


Micron’s DRAM revenue accounted for 50% of Micron’s record $4,042 million of sales recorded in Q4 2013.    The DRAM marketplace is composed of just 3 significant players and the supply and demand equation is now in equilibrium.  The 20% forecasted growth rate of smartphone sales through 2018 will continue to drive mobile DRAM bit growth even as the PC market continues to survive on little to no growth for the foreseeable future.   Micron and the memory space may have been exposed to significant price fluctuation but in a market with only 3 major players and a significantly high cost of capital to enter the markets place, the supply and demand picture looks safe and so does Micron’s profits for the foreseeable future.  Wall street analysts average earnings estimate is $2.98 per share in 2014 with a low estimate of $2.20 and a high estimate of $3.44.  Looking ahead to 2015, the average wall street analyst estimate is $2.96 with a low estimate of $1.40 and a high estimate of $3.88.

Micron reported earnings of $0.77 per share in their Q1 2014 quarter against the average wall street estimate of $0.43 per share meaning Micron exceeded analyst estimates by $0.34 or 79%.  The wall street analysts still think Micron is supplying memory to the PC marketplace and they just don’t understand the smartphone and tablet revolution that will drive Micron sales and earnings for the next 5 plus years!

Shares of Micron were up 8% today and today’s action is just the beginning of a terrific finish to 2014 for shares of Micron.  The analysts are expecting Micron to earn $0.74 in Q2 2014 when they report on Thursday after the closing bell, but investors should expect another significant beat to Micron and additional price target increases from wall street.  Micron should be valued at 15-20x 2015 earnings estimate of $2.98 per share, which would value the company at $45-60 today.  I feel confident Micron will earn over $4.00 a share in 2014 and will challenge $5.00 per share in 2015.  The Micron analysts are afraid to get in front of this memory earnings freight train, but the pure supply and demand economics along with macro economics surrounding smartphone conversions from non-smartphone mobile devices, will continue to fuel Micron’s earnings and share price for years to come.  My recommendation is to buy Micron in advance of their Q2 2014 earnings announcement Thursday after the closing bell and to hold this volatile security for the next 12 months and enjoy a 165% return alongside me.


Full Disclosure: I am long MU and have no plans to buy or sell any holdings in the next 12 months







Blogger Jeffrey Clarke is eating up the GTAT monster. Clarke appears to have closely read my Seeking Alpha article focused on GTAT beyond Apple. He also took notice of my $64 minimum target for shares of GTAT, ” Matt Margolis expects at least $64 per share and I wouldn’t be surprised”. GTAT longs will be celebrating their own cold beverage on a sunny island together in a few years as their patience and vision get handsomely rewarded.

GT Advanced Technologies (GTAT) is one of the most interesting and most written about stocks out there right now. Matt Margolis, a contributor at Seeking Alpha, has become something of an internet sensation by publishing strong speculative evidence that Apple is using sapphire technology from GTAT to add solar charging functionality to the iPhone 6. That would be awesome for Apple and iPhone customers, but is only sort of interesting from the standpoint of investing in GTAT. Apple is going to buy a lot of sapphire from GTAT regardless of whether it has solar capability or not, and I think the value of that agreement with Apple is largely reflected in the current GTAT stock price of $18 per share. What’s more interesting about GTAT is everything else it has in its pipeline that the market seems to be not valuing at all.

To be fair, this isn’t a new or novel argument. Matt Margolis has published several articles on Seeking Alpha along similar lines and has concluded that the stock is worth $64 to $85 per share. He goes into a lot of detail and gets distracted by the solar angle, though. So a lot of my below conclusions borrow from his conclusions, but I’ll summarize, bring in other sources and add my own finance-driven perspective.

Matt Margolis has estimated that revenue from the Apple agreement will be approximately $2.2B in 2016. He is equal parts aggressive and conservative, and in total the estimate looks reasonable to me.

I’m not going to do the math to estimate a per share value, but potential upside of $3.0B per year on a company with 30% margins is a great option to be buying for free. The ride might be a little bit rocky this year because GTAT isn’t expecting to return to profitability until Q3 or Q4 of this year, but if they execute on the Apple agreement and start building an order book in any of the above incremental technologies, that rocky ride will transition to simply rocking, on the upside. Matt Margolis expects at least $64 per share and I wouldn’t be surprised.

A link to Clarke’s GTAT roundup can be found on the link below.

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


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).


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.


Screenshot - 3_12_2014 , 12_28_29 AMImage


~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!)


I’ve consolidated the latest round of analyst coverage into one place. I’ve also added the Obscure Analyst numbers and detail so you can compare them side by side. One of the main differences in my estimate is that I have added Apple revenue for iWatch and iPod and my non Apple revenue indicates that GT’s “other” business lines and new business lines are set to contribute in a major way beginning in 2015 and beyond versus the “Wall Street” estimates that completely ignored GT’s non Apple business.

I think it is important to remind everyone that not too long ago GTAT’s Poly, PV Equipment and Sapphire (non-Apple) used to bring in close to $1B of annual revenue and over $1 EPS. If you look at those business lines today partnered with additional technological advances (Hyperion, HicZ, MVPE & PVD) and new revenue streams (SiC, Hyperion andTBD) along side the ripening macroeconomic conditions, you would realize, that the “old” business model can double from an annual clip of $1B to $2B by 2016 in a snap.

Screenshot - 3_5_2014 , 11_41_06 PM

My detailed analysis and coverage on GTAT can be found here

Full Disclosure: I am long GTAT and have no plans buy or sell any holdings in the next 72 hours. If you asked me for my real answer I would tell you I have no plans to sell in the next 2 years, but I’m just a bit more obscure than most.

The Obscure Analyst has initiated coverage of GT Advanced Technologies and has issued a $65 – 12 month price target.   GT’s core business outside of Apple is heading into a very receptive macroeconomic environment that will trigger significant new orders across LED, PV and Polysilicon.  The macroeconomic environment coupled with GT’s new technologies and innovations across LED, Solar and emerging markets will drive significant new bookings, that is expected to exceed $1B in the 2H 2014.  Additionally, the Obscure Analyst expects Apple to roll out sapphire cover screens for Apple’s iPhone, iPod and iWatch in 2014.

Furthermore, a full Apple sapphire laminate adoption across Apple’s iPad and MacBook is not included in this estimate. A sapphire laminate on the iPad and MacBook could provide an additional $1.6B in 2016 annual revenue.  Furthermore, if Apple, adds thin-film solar cells at $2-3 per device provided by GT, it could provide up to $1.2B of additional revenue that has not been factored into this analysis.   Lastly, the price target does not include any new technologies that may emerge out GT’s 3/14/14 Technology Conference, that might have a significant impact on 2015 and 2016 sales estimates.

EPS and revenue estimates for 2014, 2015 and 2016 are in the image below:

Screenshot - 3_5_2014 , 11_41_06 PM

Full Detailed Report is Below

I’ve been following GT Advanced Technologies for several years and their technological expertise and product roadmap is becoming more and more crystal clear every day (no sapphire pun intended). GT’s management team is full of extremely brilliant scientists and technology visionaries. The contract GT signed with Apple in November to provide sapphire material, which will be in the form of sapphire cover screens for mobile and sapphire laminate screens for iWatch and possibly more.  Apple is not the cleanup hitter in GT’s technology portfolio, even though the Wall Street analysts are putting all of their time and effort into Apple and coming up with a valuation that is driven by the Apple business. I might be the Obscure Analyst on street, but unlike the overpaid under performing Wall Street analysts, I actually understand GT’s message loud and clear. If the Wall Street analysts could see the forest for the trees, they would realize GT is about to launch phase 2 of their war chest.

Apple is the lead-off hitter in what will be an American League lineup, similar to my Boston Red Sox, whose lineup was loaded from top to bottom with talent and key contributors. GT’s sapphire business with Apple will take off with amazing speed and grace, like a prototypical money-ball lead-off hitter, that sets the stage for the “other products” in GT’s lineup, to drive in an incredible amount of additional revenue and profits for years to come. The sapphire contract with Apple will be worth over two billion dollars in annual revenue in 2015, but Apple sales could be a minority share of GT’s revenue by 2016.

2014 Guidance

GT Advanced Technologies reported Q4 results on February 24th and gave the investment community an update on the progress in Mesa, AZ. Management gave investors even more confidence that GT has the ability to scale the operations in Mesa with Apple and meet their aggressive sapphire screen price objectives. As GT put it simply, “it is all about just execution” at this point.

The company maintained their guidance in 2014 at $600-800m in total revenue,with  approximately 15% in the 1H 2014 and 85% in the 2H 2014.  Sapphire revenue would make up over 80% of 2014 sales.  During the November call, if you remember GT stated that the majority of their ASF (furnace) capacity would be tied up by Apple.  In January, they reiterated their focus that 2014 will be all about delivering to Apple. My translation: a immaterial amount of ASF furnace sales will be converted from the current backlog to revenue in 2014. With that said, I am estimating sapphire materials sale excluding Apple to be $30m in 2014.

GT announced that they had deployed $180m of PPE (majority to Apple). Import records indicate that GT HK’s worldwide operations shipped furnaces from HK to Mesa, AZ.  GT management also stated, that they would spend $500-600m in capital  expenditures, with most of the heavy lifting occurring over the first half of the year.   Assuming GT is spending $500m of capital expenditures and $180m that is being deployed from existing PPE this would allow them to purchase approximately 2,300 furnaces to grow sapphire boules.  I also believe that Apple purchased an additional 1,000-2,000 furnaces that they will own inside Mesa which seems to aline with the ambiguous contract agreement between GT and Apple.  The contract did contain language that GT would purchase Apple equipment and be reimbursed no more frequent than every two weeks.  The additional furnaces purchased or not purchased by Apple have no impact to my current estimates.

I am estimating that $75-100m of capital, will be spent to build out approximately 50 Hyperion Ion Implanter machines. The Hyperion machines coupled with advancement in GT’s solar cell research will be used to produce GT’s solar cells that will be discussed in-depth by management on March 14, 2014 along with several other products coming in 2015.   Additionally, I expect Hyperion to make its way to Mesa, AZ by the middle of 2014.   Hyperion technology is likely to be used to produce sapphire laminates for Apple’s upcoming iWatch.

Apple Cover Story

The Apple deal will provide GT with the recurring revenue and consistent cash flow that it needs to nurture their investment seeds that have been dormant for the last several years. GT’s future is extremely under appreciated and misunderstood and they cannot and should not ever be looked at as a “sapphire materials company” or as “just a solar company” ever again. They are quietly establishing themselves as a leader in cutting edge, disruptive technology, and they are now well-funded, well versed and ready to take technology places we have only dreamed of. GT’s CEO drove this point home very early in the Q4 2013 conference call on February 24th (see below).

Although we have significant opportunities in sapphire, the GT story is not only about our emerging sapphire materials business. In fact, our entry into sapphire materials may enable us to expand into other materials segments once we have fully ramped the operation in Arizona. The many diversification and investment seeds we have planted over the last several years in the LED, power electronics, advanced solar and industrial markets are expected to begin to bear fruit over the next 18 months. We are seeing significant interest in our new products and now expect equipment orders from these initiatives to be received during the latter part of 2014, with meaningful revenue recognition beginning in early 2015

As some of you might have already noticed, I’ve been digging even deeper into GT’s technological tool set to figure out where these disruptive technologies can be applied. At this point it’s safe to say that GT has more tools than any hardware store in town! GT saw an opportunity in sapphire cover glass when they purchased Crystal Systems.  GT dedicated the time and spent the money to monetize their expertise of the technology and create to hit a price point, that made the sapphire cover deal attractive enough, to land the Cupertino whale. During the Q&A section of last Monday’s conference call TG provided what I would characterize as his “money back guarantee” that GT will deliver related to output, cost and timing.

Our confidence comes from deep understanding of the unique technology that we’ve developed for these applications. And as I’ve indicated before, we’ve continued to progress on the performance of our ASF furnaces and the cost per millimeter that we expect to achieve. And so, we’re quite confident in our technology. And the rest of it is execution. I mean these are sizable projects and so execution has always an impact, but we’re confident. And as you know, we generally don’t give guidance unless we have a pretty good understanding that we’re going to hit it.

GT’s sapphire sales to Apple do not have any capacity restraints. The Mesa sapphire plant measures 1.3 million feet can comfortably hold 4,000 to 5,000 ASF furnaces at a minimum. I am expecting Apple to rolls out sapphire cover screens for the iPhone, next generation iPod and sapphire flexible sapphire laminate displays for the iWatch no later than Q3 2014. The iPod may surprise some of you, but an Apple job posting in January gave away a big clue that a new design was not only coming to the iPhone but to the iPod as well.

The iPhone and the iPod at quick glance are nearly identical, same dimensions but the iPhone has more functionality than the iPod because it operates as a phone and not just a hand-held device. The next Apple product on the docket is the iWatch.  The iWatch is expected to sport a flexible display, will likely feature solar charging and may even sport two batteries; an integrated core battery and a secondary battery that could be charged by kinetic energy or solar power (possibly supplied by GTAT). I have assumed GT will have their Hyperion technology up and running inside Mesa by the middle of the year to fulfill the inventory buildup needed for the iWatch release in 2014. Additionally, if you look at GT’s recently issued patents (resulting from Hyperion beta testing) it gives a clear indication that GT has progressed Hyperion far enough to it’s one-of-a-kind technology to produce sapphire laminates.  Apple already holds various sapphire patents including a laminate patent that describes taking two sapphire laminates in combination with or without glass to build a sapphire screen The Apple iWatch is expected to be relatively small (2 x 2 inches), which will require far less sapphire and time to ramp up sapphire laminate production using GT’s Hyperion technology.

There has been a lot of “noise” since November as to whether or not GTAT will be producing sapphire cover screens for Apple as well as discussions  whether or not the screens would be full sapphire covers or laminates. The answer is GT will be supplying full sapphire cover screens for Apple’s iPhone and iPod. Sapphire laminates are a terrific cover  option for the iPhone and iPod, however Apple will want to take advantage of the “performance upgrades” that will be made available by a full sapphire cover screen.  To add some more validity to my Obscure stance, I’ve included some comments Tom made over the past two years regarding sapphire cover screens.

Tom Gutierrez – Comments on Sapphire Over the Past 2 Years

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

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 after market applications

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

I don’t think it’s a cost advantage discussion, Jeff. I think it’s really a — if you’re in the box of cost, it’s performance, okay? The performance of the sapphire relative to scratch resistance, relative to breakage resistance, relative to optical qualities as such and it also carries a pizzazz with it, okay, that makes it a somewhat different solution than the existing solutions are. But what I can confirm to you is that we’re in the cost box. We’re in the cost box, it’s now about performance. Can we demonstrate and can our customers demonstrate as they’re piloting our capability whether or not it’s something that they want to do. There is a cellphone out there already that uses sapphire. The Vertu cellphone uses sapphire, and, as you know, all high-end watches use sapphire for the same reasons: scratch resistance, optical qualities, et cetera. And so it’s not a cost down, it’s a performance upgrade

Apple Product Roadmap 2014-2016

GT management confirmed that they have driven down the price to where they want, at this point I am estimating ASP of $10 per screen on average for the upcoming iPhone(s) and iPod. Apple’s iWatch is expected to support a flexible sapphire laminate display. The “slapwatch” patent filed by Apple indicates that the display will most likely be flexible in nature and sapphire laminates are a perfect candidate to fill the required job. I have estimated an average ASP of $4 per iWatch display. I am expecting the iPhone/iPod and iWatch to arrive no later than September/October 2014. My model estimates that sapphire covers will be used in 70% of Apple’s unit sales in 2015 and beyond. Apple has launched older iPhone models in India and may continue to keep around some lower cost models in select markets. My forecast of unit sales are derived by utilizing the smart phone industry trends provided by IHS.  My calculation base Apple market share at 17% of the total smart phone sales. I feel my 70% penetration rate for sapphire for sapphire cover screens for the iPhone is reasonable but conservative and will provide a safety to my market share estimate if actual sapphire screen adoption percentage comes in above 70%.

Apple Product Roadmap 2014-2016 (Excluded From my Estimates)

What is not included in any of my Apple estimates is potential and likelihood that Apple adds sapphire laminates screens to the iPad and MacBook.   Additionally, I have not included any thin-film solar cell revenue that could be received from Apple if GT supplies solar cells for Apple’s product lines in 2014, 2015 or 2016. The sapphire laminate screen pricing is a mystery, but I am estimated average ASP for sapphire laminates for the MacBook and iPad at $13 per device. In a bullish scenario, if Apple rolls out sapphire laminates for the iPad and MacBook it could add an additional $1.6B in revenue annually by 2016. Additionally if Apple added Solar cells at $2-3 on average per device this could additional $800m to $1.2B of additional revenue by 2016. The addition of solar cells across all of Apple’s devices and introduction of sapphire laminates in the iPad and MacBook represent an additional $2.8B of annual revenue or $3.00 EPS in 2016. My review of Apple’s technical product patents related to sapphire and solar charging strongly suggest that both of these events will happen and it’s not a question of if but when.

Other Lines of Business

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I expect GT’s existing backlog of $600m to be worth $450m by the end of 2014. I am expecting new orders of $1.5B to arrive in 2014 with approximately 77% of those orders to come from existing markets including PV equipment, sapphire equipment and polysilicon. The macroeconomic environment for poly, solar and sapphire are all extremely supportive heading into 2014. LED equipment utilization is at or near 100%, Solar is expected to run through the excess poly supplies and drive up the polysilicon price per KG from $21 to $25 by the end of 2014. Solarbuzz is already estimating a major comeback in solar capital equipment purchases by 2015.   GT is already “well positioned on several on projects” in the Middle East, that are worth $300-500m annually beginning in 2016. GT Power Tec agreement is likely to contribute $100-200m in revenue in 2015 and 2016 alone. GT’s solar and PV business averaged a combined $600m in recognized revenue over 2010 and 2011. The upcoming capital expansion will reward  low-cost, thin-film and innovative solutions with significant orders.  The remaining $350m of new orders or 23% of 2014 bookings will come from GT’s Hyperion and SiC (Silicon Carbide) business

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The Obscure Analyst’s Takeaway

The Apple deal will provide GT with the recurring revenue and consistent cash flow that it needs to nurture their investment seeds that have been dormant for the last several years. GT’s future is extremely under appreciated and misunderstood but Wall Street analysts and GT cannot and should not ever be labeled as a “sapphire materials company” or as “just a solar company” ever again. They are quietly establishing themselves as a leader in cutting edge, disruptive and game changing technological innovation. GT is prepared, willing and able to take their disruptive technology and created market niches places we have only dreamed of or seen in sci-fi movies. My research report was completed for all of the little people, who rely on Wall Street firms and their inability to deliver in-depth research on GT Advanced Technologies. Everything mentioned in this article, including; patent information, patent interpretation, job postings, market trends, products and industry trend, was readily available for anyone, who took the time and knew how to find it. I hope all of the Wall Street analysts take some notes of how to deliver an informative, in-depth research report. Lastly, I have to give thanks to my fellow street analysts for funneling information and informative ideas my way because this could not have been done without all of your support!


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


GT Advanced Technologies left  investors with a cliff hanger (see quote below) during last week’s Q4 2013 conference call.  It was like watching your favorite TV show’s finale and having to wait until the fall to find out what happens.  I’m hoping to shed some light on what we might expect on March 14.  GT has been saying for quote sometime that “solar costs need to come down” and you know what I think they have done it.  I have to tip my hat again GT’s CEO Tom Gutierrez  and his team of scientists for their most recent invention.

While solar is not expected to contribute meaningfully to revenues over the next year, it remains an important part of our portfolio. However, we continue to believe that for the solar industry to fully reach its potential, cost must come down dramatically. To this end, 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.

CVD Background

Chemical vapor deposition (CVD) in simple terms is defined as the chemical process to produce high-purity, high-performance solid materials.   In GT’s case they use CVD reactors to manufacture electronic grade or solar grade polysilicon.   The two most common ways to produce polysilicon deposit is through a CVD reactor, using the Siemens or Rogers Heitz method, which require the assembly of a silicon rod within the reactor, that has to be mounted and connected so that electrical feeds pass through.  My simple translation, the current process involves a whole assembly process inside the reactor before pushing the green button to turn it on to grow polysilicon.

GT’s website currently lists three CVD reactor models  for sale; SDR 400,  SDR 500 and SDR 600.  All of the reactors currently use the Siemens-type (polysilicon rod) process to manufacture electronic grade or solar grade polysilicon.  The top end model SDR 600 produces greater than 600 MTA (metric tons annually) was introduced on October 25, 2012 according to a GT Press Release.  GT’s polysilcon processing system equipment, which is used to “to harvest, transport, process, and package the polysilicon rods produced in GT’s SDR series CVD reactors,” is also solely dedicated to the Siemens method of producing polysilicon rods.  I am a big fan of GT’s CEO and I wanted to share various comments he has made since 2012 on the solar industry.

Tom Guiterrez Aug 2012  Q2 Earnings Call “the industry (solar) must accelerate the development of technologies that will allow for profitability at significantly reduced total systems cost of $2 per watt at the system level or below”

Tom Guiterrez Nov 2013 Q3 Earnings Call “working on other downstream PV technologies that we believe will have a significant impact on the solar cost structure”

Tom Guiterrez  Feb 2014 Q4 Earnings Call “However, we continue to believe that for the solar industry to fully reach its potential, cost must come down dramatically. To this end, we have a deployed a new technology that we expect will significantly impact the economics of producing solar cells and modules”

Ground Breaking Technology

I’ve spent a lot of time covering all the bases to make sure that their most recently granted patent has not been deployed within GT’s current equipment, because it will change competitive landscape of solar for years to come.  GT’s most recent patent is detailed in within the method of making large surface area filaments for the production of polysilicon in a CVD reactor  patent was granted on 2/11/14.   The most recent granted CVD reactor patent was related to a previous patent that was filed on April 28, 2006.  The bottom line is that GT has been working on this for a while,  but this invention has yet to be deployed in GT’s CVD reactor equipment.  With that said, I believe that is about to change by the beginning of 2015.

From the comments above its obvious GT’s CEO has been broadcasting the need to reduce the total system costs of solar since August 2012, if not longer.  He specifically mentions that the total systems cost must come down.  Total systems cost to me is your soup to nuts.  For solar costs it would include the cost of buying equipment, producing polysilicon, cutting silicon wafers all the way through to a completed solar cell.

GT’s recently granted patent involves replacing the silicon rod method (Siemens) and instead using silicon shapes such as silicon tubes, ribbons and other large area filament shapes which increases the surface area for deposition of silicon.  In simple terms, the different silicon shapes have a larger surface area and kind of act like a magnet, the larger the surface area, the more polysilicon that can be deposited within the CVD reactor.  How much more? According to the patent the production throughput can be increased 30-40% without compromising the quality of product and without significant changes to the reactors.  Additionally, the CVD reactor itself would can be simplified; currently the system has subsystems and two power sources that various currents and voltages.  The new process would enable the complicated power supply and circuitry to be replaced with a simple system of current supply and temperature controls.  A simpler power supply and circuitry setup will also lead to a reduction in the cost of the capital equipment as well.  Below are some key highlights from the invention (note the MTA yield numbers are from 2006 and actually CVD yields have increased significantly since 2006) :

It is an object of the present invention to increase the throughput of conventional CVD reactors by incorporating silicon shapes, such as silicon tubes, ribbons, or other large surface area filament shapes of similar electrical properties, instead of the conventional solid slim rods, so that the initial surface area for deposition of silicon is increased. For example, using a tubular silicon filament of 50 mm diameter rather than the conventional slim rod, the production throughput can be increased by 30-40% without compromising the quality of the product and without significant changes to the reactors. The required change to the reactor design to use the alternative filament is so minor that it can be retrofitted to current CVD reactors quickly and at very modest cost. It can even more easily be incorporated into new reactors of the same basic design, with further cost reduction benefits.

This eliminates the requirement of a complex array of subsystems and two power sources; one power supply that can provide very high voltage and low current, and a second power supply that can sustain a very high current at relatively lower voltage plus the associated switching circuit. The two power supplies and related switching circuitry can be replaced with a simple system of current supply and temperature controls.

This change in design will result in lower capital equipment costs for new reactors of similar design, and for retrofit of existing reactors when required. This change and type of operation avoids cumbersome and time consuming start up procedures, lowers down time and increases productivity, for applications where the resulting purity level is acceptable.

For a conventional 7 mm diameter solid slim rod, the growth time is more than 70 hours and the reactor produces less than 231 metric tons per year when the down time between operating cycles was limited to 6 hours. When the solid slim rods are replaced with 50 mm OD tube filaments of the invention, the growth or CVD times are expected to be about 45 hours. Using the same 6 hour down time curve d for the calculation, 304 metric tons of polysilicon can be produced per year. As can be seen, the use of a 50 mm OD tubular starting filament in accordance with the invention yields about 30% more in throughput under the normal downtime of about 6 hours.

The Current Solar Landscape

PV Magazine  published an article over the winter regarding the falling price of silicon wafers.  Included in the PV Magazine article was some information from GT’s favorite source NPD Solarbuzz.  NPD Solarbuzz estimates that the cost to make silicon wafers might breach $0.20/watt in 2014.  The estimated silicon wafer cost of  $0.20 cents per watt was split between wafer processing costs (60% – 12 cents) and polysilicon production costs (40% – 8 cents).
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Solarbuzz indicates that the cost of polysilicon accounts for 40% of the total cost of silicon per watt.  GT’s CVD reactor invention can reduce the cost to polysilicon by 30-40% on the product side plus reduce capital expenditures, both of which will only enhance GT’s odds of landing significant future contracts.  In addition to the GT’s CVD reaction invention, GT also received a recent patent related to producing thin-film solar cells, which have several applications.    The Epitaxial growth on thin lamina focused on thin-film solar cells and GT’s ability to build a triple junction PV cell, that can be applied to power delivery, consumer electronics and elsewhere.

The other piece of the Solarbuzz chart is the cost of wafer processing,  which represents nearly 60% of the total cost per watt.    GT’s thin-film solar cell patent essentially enables the growth of a semiconductor material on a donor body, by firing GT’s Hyperion’s ion cannon which splits (exfoliates) the semiconductor material from the donor body, to form a super thin lamina (layer) of the semiconductor material.  The cost reductions from Hyperion will also have a significant impact on the cost to make silicon wafers.  As some of you know from my previous updates, TG is very confident in Hyperion, as evidenced by his February 2013 comment during the Q4 2012 Q&A.

Tom Gutierrez – “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”

The highlights within GT’s thin film solar cells and triple junction PV cells are listed below:

Epitaxial Growth on Thin Lamina


[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.

[0020] Any number of electronic devices may be fabricated by the methods of this invention as shown in FIGS. 4 and 5. In some embodiments a triple junction PV cell may be fabricated with lamina such as a germanium lamina (FIG. 4A). In some embodiments an LED may be fabricated by methods of this invention with a gallium nitride lamina (FIG. 4B). Solid-state power devices–used in switching or amplifying large voltages and currents–are important components in communications, power delivery, and, increasingly, transportation applications. These devices may also be constructed by methods of this invention.


GT’s recently granted CVD reactor patent would allow them to significantly reduce the cost of producing polysilicon from current levels (by as much as 30-40%) as well as reduce the cost of capital equipment.  GT would be the first to buck the trend and switch from Siemens method of producing polysilicon to a new method that takes advantage of tube filaments with larger surface areas to increase CVD reactor throughput and lower cost per KG of polysilicon.  Strategically, it makes prefect sense to perfect the CVD reactor process and technology and focus on having it ready for the 2015 solar equipment upgrade cycle.  Additionally, Hyperion’s exfoliation methods to separate a silicon block into super thin wafers, can dramatically reduce the current silicon wafering costs as well as improve the overall yield.  If you factor in GT’s recent thin-film solar cell patent, partnered with Hyperion, GT is on track to produce the thinnest solar cells on the market.  They are also already considering triple junction PV cells, which is one way to advance the design and assembly of solar.

If GT can effectively bend the cost curve throughout the solar supply chain they will set themselves up as the leading solution in solar, head and shoulders above any competitors and on target to receive a significant piece of the solar spending pie in 2015 and beyond.  Courtesy of Solarbuzz, you can see that capital spending is expected to pick up significantly in 2015 and reach industry spending levels not seen since 2010.  GT averaged over $600m in annual solar revenue between PV equipment and polysilicon over 2010 and 2011.    I see no reason why GT can’t repeat or even double their annual revenue solar achieved over the course of 2010 and 2011 and bring in $1.2B+ in annual revenue ($1.00 + EPS) just from solar by 2016.  They are in a much better position heading into 2015 compared to 2010 based on the tools in their technology portfolio.   GT Advanced Technologies might be setting themselves up to bend the solar cost trend and help push solar installations to another level far sooner than currently projected beginning in 2015.  I am currently modeling Solar PV and polysilicon sales at $1.2B for 2016.  Several of the Wall Street analysts covering GTAT have all-in revenue estimates of $1.5B to $1.9B for 2016.  It’s clear the analysts don’t understand GTAT and need to be spoon fed information by the Obscure Analyst.

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GTAT’s technological advances solar industry as evidenced by recent patents; related to thin firm solar cells and methodology to grow polysilicon in a CVD reactor along with commercialization of Hyperion might enable GT Advanced Technologies to be the:

  • Highest yielding polysilicon equipment maker
  • Most cost effective polysilicon raw material equipment supplier/producer
  • Most cost effective polysilicon total solution in the marketplace
  • Most cost effective silicon wafer equipment supplier/producer
  • Most cost effective thin film solar cell producer for consumer electronics and power systems
  • Produce the thinnest and most efficient solar cells in the industry

If solar revenue can bring in over $1B a year in annual revenue by 2016 and solar sales are also expected to decline as a percentage of GT’s overall sales; then just how BIG is the total annual revenue projected to be over the coming years? $3B? $6B? 

However, we’re still of the opinion that the solar capital equipment market is not likely to show significant opportunity until 2015. As the solar industry returns to health, we expect to play an important role in helping our customers lower cost throughout the process of manufacturing solar cells. Solar will continue to be a part of our portfolio. However, as our diversification initiatives get traction, we expect that it will become a smaller percentage of our business in the coming years.

I’ll leave you with my research thesis…….

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

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


I’m just finalizing my research and summarizing the details.   The overview will be exclusive to my blog so this will be a true test of social media, so I am employing all of you to be the messenger and see how fast the word can spread.   Here is my teaser; this is a game changer and will propel GTAT years ahead of its competitors.   GT’s Tom Gutierrez  left investors with this (see below) on 2/24/13 and investors will have the answer tonight.

While solar is not expected to contribute meaningfully to revenues over the next year, it remains an important part of our portfolio. However, we continue to believe that for the solar industry to fully reach its potential, cost must come down dramatically. To this end, 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.


~The Obscure Analyst