Apple/GTAT sapphire plant began shipping sapphire goods in March

· 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

Apple sapphire plant is operational – new images of steam emerge

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.

Apple orders $20m of lasers from Han’s Laser

According to wantinews Apple placed a $20m for sapphire laser cutting machines on April 1st. The report indicates that Han’s laser predicts that a new generation of high end models of the iPhone will use sapphire cover screens on the surface of phones. The report also indicates that delivery of the first laser cutting machines are expected by July/August.

Recently, Han’s Laser Technology, Inc. sapphire surface protective cover (to protect the smart phone screen, etc.) with a laser cutting machine to get Apple’s approval of the U.S. Moreover, the company received about $ 20 million from Apple in the hands of the first laser cutting Machine orders(http://www.wantinews.com/)(Finance News http://www.wantinews.com/). Han’s Laser predicted that a new generation of high-end models of the iPhone will use the sapphire surface cover material.

Han’s Laser estimated in July and August 2014 to provide the first Apple laser cutting machine supplier would cover the surface directly to the phone Apple – Factory Changsha blue Synopsys delivery.

The Obscure Analysts takeaway – Using laser cutting sapphire machines to cut sapphire for cover screens would be a new concept and process. It is likely that GT will be using a combination of diamond wire saws and laser cutting methods. I previously reported that Apple had placed a $80m diamond wire saw order with Meyer Burger and delivery of those saws was expected to begin in January and be completed by mid year. The cost box to produce sapphire screens is already within a competitive range versus Gorilla Glass without diamond wire cutting saws. I believe it would make more sense for GT to use laser cutting methods on larger surface sapphire such as the iPad to further reduce the sapphire cover screen cost for a larger surface. It also makes more sense to use a new cutting method (laser cutting) on a a lower volume product (iPad) versus the iPhone.

Full disclosure I am long GTAT and have no plans to add or sell any holdings

Apple’s sapphire plant likely ramped up production significantly by the middle of February

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.

 

 

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.

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

 

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.

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.

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.

 

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.

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.

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

 

Mesa Sapphire Plant Structure Activity – Sneak Peak

A complete breakdown will come later but here is a sneak peak detailing some of the Mesa sapphire plant activity. Heat exchangers, cooling towers, associate piping and electrical, fan coil units, new exhaust for the UPS and battery rooms. Lighting for north and south end house and pump.

ELEC BLDG NORTH 3600 SF
ELEC BLDG SOUTH 1440 SF
PUMP HOUSE 2000 sf

BLD2014-01287 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.

Exterior bldgs

BLD2014-00391 PACKAGE – NORTH ELECTRIC BUILDING. JOB #14-B-35380. BUILDING IS A 3600 SQ FT, F-1 OCCUPANCY, TYPE IIB CONSTRUCTION, FIRE SPRINKLERS. 3
BLD2014-00397 PACKAGE FOR E HOUSE SOUTH BUILDING. STEEL BUILDING, 1440 SQ FT, F-1 OCCUPANCY, CONSTRUCTION TYPE IIB. 3
BLD2014-00399 DESIGN PACKAGE – PUMP HOUSE BULDING, A 2000 SQ FT, F-1 OCCUPANCY, TYPE IIB CONSTRUCTION, SPRINKLERED BLDG.

PLN2013-00416 LAND SPLIT APPLICATION REC
DOC2013-00270 COPY OF ZONING CASE FILE Z11-012

Apple granted approval for “limited” go-live at Arizona sapphire plant on January 14, 2014

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:

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.

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

GT’s Sapphire shipments to Apple are likely to commence in Q2

by Matt Margolis

A job posting today on GTAT’s website for Accounts Receivable/Invoicing at GT’s Mesa location coupled with other recent news detailed below is a clear indication that GT will likely commence sapphire shipments to Apple prior to July 1st. The job specifics are below but in short the new position will; post and record accounts receivable data, create and mail client statements, maintains spreadsheet of outstanding invoices.

The new job is clerical in nature, but is required to have in place before revenue is generated and managing your accounts receivables and customer billing becomes a priority. Appleinsider recently reported that Apple was targeting June to complete the Mesa expansion, which is another signal that the 9 Mesa plant phases are nearly completed within the Mesa sapphire plant. The supply chain has recently announced production ramp ups for the A8, display panels, batteries and memory. Pegatron is adding new workers and is reportedly set to begin their iPhone manufacturing ramp up in Q2. After I factor in all of the recent news, it seems clear that GT is now very close to commencing sapphire shipments to Apple themselves and recording meaningful revenue sometime in Q2 2014, ahead of the upcoming iPhone 6 launch.

Position Summary
The person will be responsible for interfacing directly with the Corporate Accounting Department, both on the phone and via email. This individual will be in charge of the billing aspect of accounts receivable for the Mesa, Arizona manufacturing facility. The person will be responsible for ensuring that all the Company’s sales are properly billed, according to agreed-upon terms and conditions, in a timely manner. In addition, email invoices to customers on a daily basis, review and process credit memos, and reconcile customer receivable balances.

Responsibilities
Set-up new Customers in ERP system
Perform day-to-day financial transactions including verifying, classifying, computing, posting and recording accounts receivable data
Creates and uses spreadsheets and word-processing programs to perform their job
Create client statements and mailing them monthly.
Matches invoices with payments in the accounting system and codes accordingly
Tracks all invoices mailed and ensures that copies are maintained in the office’s filing system
Maintains a spreadsheet per client that includes a list of outstanding invoices, invoice due dates and the amount of time the invoice has been outstanding.
When clients are paying an invoice, might be responsible for contacting them to determine when payments will be made.
Generates multiple AR accounting reports and disseminating them within the accounting department.
Reconciles the AR ledger of individual customer accounts
Participates in accounting system close procedures, typically on a monthly, quarterly and annual basis.
Supports other accounting projects as assigned
Job Location
Mesa, Arizona, United States
Position Type

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