Posts Tagged ‘Sic’

by Matt Margolis

refractory furnace

 

On April 7th, 2014 GT Advanced Technologies announced that it has received a $58.6m order high temperature refractory metal furnaces that are used for a variety of industrial purposes.  GT also indicated that the revenue associated with this order is expected to be booked in the 2H2014.  I was wondering just like everyone else where did this come and what was it for?  The highlight from the press release announcing the deal is below:

GT Advanced Technologies (GTAT) today announced that it has received $58.6 million in orders this quarter for high temperature refractory metal furnaces that are used for a variety of industrial purposes. These orders will be reflected in Q2 reportable backlog and GT expects to recognize revenue from these orders during the second half of 2014.

“Thermal Technologies, which was acquired by GT in 2013, developed the high temperature refractory furnace technology that will be deployed as part of these orders. It is expected that several other industrial products developed by Thermal Technologies, will be taken to market through our existing sales and service channel, adding to our diversification beyond our traditional markets,” said Tom Gutierrez, GT’s president and CEO.

According to the press release this $58.6m order was related to high temperature refractory furnace technology  that was developed by Thermal Technologies (who was acquired by GT in 2013).  So what are refractory metals?  According to wikipedia, they are a class of metals that are extraordinarily resistant to heat and wear.  The most common definition of refractory metals include niobium, molybdenum, tantalum, tungsten and rhenium which all share a melting point above 2000 °C .  I did well in my high school science classes but I don’t have a fond memory of these periodic table elements but needless to say they work great in refractory furnaces.

 

Refractory Metals Screenshot

GT’s refractory furnace sales most likely fell under under one of two categories; automatic processing furnace systems (APF) and ceramic processing furnace systems (CPF).  Refractory furnaces do not need to be attended (unlike sapphire growth furnaces) and they rapidly heat and cool (unlike sapphire growth furnaces).  The APF and CPF furnaces are used to process high purity advanced ceramic materials.   Advanced ceramic materials include  include silicon carbide and tungsten carbide.    Silicon Carbide is currently sold in various forms including fiber, foam, power, monofilament and sheet.  Advanced materials are commonly found on crushing equipment for mining and also are used in medicine, electrical and electronics industries.   GT is already focused on the Silicon Carbide market and I believe this was GT’s first sizable furnace order that will be focused on melting and forming Silicon Carbide products.  It is also important to note that the Thermal Technology products and Silicon Carbide were completely left of GT’s March 14th Technology conference.  I believe there is an opportunity for GT to create even more shareholder value through the sale of its Thermal Technology equipment tool set.  Stay tuned to the Obscure Analyst for further updates on this hidden gem!

 

Automatic processing furnace systems (APF) and ceramic processing furnace systems (CPF) provide fully automatic, unattended operation at temperatures to 2500°C. Parts processing is quickly cycled with rapid temperature ramp up (>100°C/min) and ramp down (up to 300°C/min). These systems may be configured as a hydrogen furnace and/or high vacuum furnace.  In addition to the main heating element, optional top and bottom trim heaters are available for excellent temperature uniformity throughout the entire hot zone.
Thermal Technology’s APF and CPF furnaces are used for processing high purity advanced ceramic materials which are susceptible to contamination in traditional graphite furnaces. These furnaces also process refractory metals under high vacuum conditions at elevated temperatures and can be supplied without high vacuum pumps for processing in inert or reducing gas atmospheres.

– See more at: http://www.thermaltechnology.com/production-furnace.html?id=100#sthash.pffbRuQi.dpuf

Automatic processing furnace systems (APF) and ceramic processing furnace systems (CPF) provide fully automatic, unattended operation at temperatures to 2500°C. Parts processing is quickly cycled with rapid temperature ramp up (>100°C/min) and ramp down (up to 300°C/min). These systems may be configured as a hydrogen furnace and/or high vacuum furnace.  In addition to the main heating element, optional top and bottom trim heaters are available for excellent temperature uniformity throughout the entire hot zone.
Thermal Technology’s APF and CPF furnaces are used for processing high purity advanced ceramic materials which are susceptible to contamination in traditional graphite furnaces. These furnaces also process refractory metals under high vacuum conditions at elevated temperatures and can be supplied without high vacuum pumps for processing in inert or reducing gas atmospheres.

– See more at: http://www.thermaltechnology.com/production-furnace.html?id=100#sthash.pffbRuQi.dpuf

Automatic processing furnace systems (APF) and ceramic processing furnace systems (CPF) provide fully automatic, unattended operation at temperatures to 2500°C. Parts processing is quickly cycled with rapid temperature ramp up (>100°C/min) and ramp down (up to 300°C/min). These systems may be configured as a hydrogen furnace and/or high vacuum furnace.  In addition to the main heating element, optional top and bottom trim heaters are available for excellent temperature uniformity throughout the entire hot zone.
Thermal Technology’s APF and CPF furnaces are used for processing high purity advanced ceramic materials which are susceptible to contamination in traditional graphite furnaces. These furnaces also process refractory metals under high vacuum conditions at elevated temperatures and can be supplied without high vacuum pumps for processing in inert or reducing gas atmospheres.

– See more at: http://www.thermaltechnology.com/production-furnace.html?id=100#sthash.pffbRuQi.dpuf

Automatic processing furnace systems (APF) and ceramic processing furnace systems (CPF) provide fully automatic, unattended operation at temperatures to 2500°C. Parts processing is quickly cycled with rapid temperature ramp up (>100°C/min) and ramp down (up to 300°C/min). These systems may be configured as a hydrogen furnace and/or high vacuum furnace.  In addition to the main heating element, optional top and bottom trim heaters are available for excellent temperature uniformity throughout the entire hot zone.
Thermal Technology’s APF and CPF furnaces are used for processing high purity advanced ceramic materials which are susceptible to contamination in traditional graphite furnaces. These furnaces also process refractory metals under high vacuum conditions at elevated temperatures and can be supplied without high vacuum pumps for processing in inert or reducing gas atmospheres.

– See more at: http://www.thermaltechnology.com/production-furnace.html?id=100#sthash.pffbRuQi.dpuf

Automatic processing furnace systems (APF) and ceramic processing furnace systems (CPF) provide fully automatic, unattended operation at temperatures to 2500°C. Parts processing is quickly cycled with rapid temperature ramp up (>100°C/min) and ramp down (up to 300°C/min). These systems may be configured as a hydrogen furnace and/or high vacuum furnace.  In addition to the main heating element, optional top and bottom trim heaters are available for excellent temperature uniformity throughout the entire hot zone.
Thermal Technology’s APF and CPF furnaces are used for processing high purity advanced ceramic materials which are susceptible to contamination in traditional graphite furnaces. These furnaces also process refractory metals under high vacuum conditions at elevated temperatures and can be supplied without high vacuum pumps for processing in inert or reducing gas atmospheres.

– See more at: http://www.thermaltechnology.com/production-furnace.html?id=100#sthash.pffbRuQi.dpuf

Full Disclosure: I am long GTAT and will add additional shares once my April blog revenue arrives.

 

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by Matt Margolis

If you paid close attention a week ago to my Merrimack plant expansion and renovation news, you would be in my camp that we knew some sort of deal was coming.  I fully expect the expansion in Merrimack will be outfitting the manufacturing operations announced in today’s press release.  For full disclosure, I was kind enough to share Merrimack expansion news with a NH Business Review and they followed up with GTAT, asked some questions and put out a report.  Additionally, I took my efforts to Seeking Alpha to further expand the reach of the news.  I don’t believe GT was expecting someone to report on its planned and approved expansion before GT had a chance to “formally” announce its plans to the public.  Investors should be expecting GT’s management to touch upon both topics (Merrimack and today’s announcement) next week during the Q1 2014 conference call.

The biggest question I think everyone has is what is the size of the announcement and when will revenue hit?  GT’s CEO has already informed investors that he doesn’t build a mouse trap and wait for the mice.  Instead he works with the customers and gives them what they want.  GT put together a comprehensive expansion plan in just a few weeks for their Merrimack location.  GT was granted approval on April 1st and they want this project completed in 6 months or less. Reading between the lines and thinking outside the box (still haven’t found the box) I believe we could see some contribution of revenue in Q4 of 2014 in the neighborhood of $25 to $75m.  The key to sizing up today’s news is understanding the target markets along with the new products and adoption of those products that will occur.  If GT can sell the entire package of furnaces, Hyperion and bonding equipment to each interested party the value of today’s press release may add $500m or more in revenue to GT’s top line as soon as 2015.  GT would not shutter all or some of their R&D operations unless their was a significant slice of pie to be had.  I am very curious for an update on GT’s expected Hyperion market adoption rate.   GT is now selling a complete solution (growth, exfoliate and bond) versus just the selling the furnaces to grow materials.

According to Hyperion Lamina Production Technology press release:

The company has entered into a memorandum of understanding (“MOU”) with European-based EV Group (“EVG”), a global leader in specialty bonding and material handling equipment, to work together in various collaborative arrangements including jointly developing high volume production processes and equipment necessary to bond the ultra-thin sapphire and SiC lamina, produced by GT’s Hyperion™ technology, to engineered substrates such as glass, silicon, and plastics.

GT’s business model will be focused on selling the bonding and coating equipment developed through these initiatives.

“Our sapphire composite material development program is focused on leveraging the combined expertise of GT and our technology partners in order to build a new market for low-cost and highly-durable substrate solutions for next generation consumer and industrial products,” said Tom Gutierrez, GT’s president and CEO. “These programs enhance our technology portfolio and leverage our significant investment in our Hyperion technology.”

The announcement today regarding GT’s strategic initiatives surrounding Hyperion Lamina Production Technology was partially on my radar.  From reading previous conference call transcripts (see GT’s management comments at bottom) I knew GT was working on composite glass, however I had no idea they would enter the bonding market.  GT’s entry into the bonding market makes complete sense, if you think about how GT focuses on the entire product life cycle, from birth to end product.  GT’s announcement today allows them to own three significant processes within this entirely new product life cycle; material growth, exfoliating material in lamina and bonding the lamina onto various substrates (surfaces) including glass, plastics and silicon.  GT may produce composite material or sell equipment to produce composite glass, however this one item it still very unclear based on the press release.

#1 Selling Material Growth Equipment – GT can sell their SiC furnaces to produce Silicon Carbide and they can sell ASF furnaces to produce sapphire (under the exclusivity of the Apple deal consumer electronics is NOT an available marketplace)

#2 Selling Exfoliating Material Equipment – GT can sell Hyperion to exfoliate SiC and Sapphire into 25-50 micron thick lamina

#3 Selling Bonding Lamina Equipment – GT can sell equipment that will bond the lamina to various substrates (glass, plastics, silicon)

#4 Selling Composite Glass Equipment or Producing Composite Glass? – This one seems a little ambiguous but it looks like GT is partnering with a glass substrate maker to produce composite glass.  My open question is whether GT will produce or sell the equipment that will produce this new material.

GT’s announcement today and focus is broken into 3 product segments, Sapphire and Sic on glass, plastics and silicon.  Sapphire laminate on composite glass and Aluminum Oxide Coating.

Sapphire and SiC on glass, plastics and silicon

The company has entered into a memorandum of understanding (“MOU”) with European-based EV Group (“EVG”), a global leader in specialty bonding and material handling equipment, to work together in various collaborative arrangements including jointly developing high volume production processes and equipment necessary to bond the ultra-thin sapphire and SiC lamina, produced by GT’s Hyperion™ technology, to engineered substrates such as glass, silicon, and plastics.

Sapphire laminate on composite glass

GT announced it will begin working with a leading glass substrate producer to develop specially engineered substrate materials that can be bonded to ultra-thin sapphire lamina to create unique composite solutions that expand the reach of sapphire into a broader set of applications.

Aluminum Oxide Coating (Sapphire in a coating form) (Al2O3)

The company also announced that it has acquired patent-pending technology for producing low-cost, scratch-resistant aluminum oxide coatings for various substrates including glass and plastics. These coatings are expected to provide some of the durability and scratch-resistant properties of crystalline sapphire at a lower price point to address market opportunities where cost is paramount and not all of the properties of sapphire are required.

 

Below are some comments made by GT regarding their Sapphire business beyond Apple and LED over the last year (Comments via Seeking Alpha)

Q1 2013

In addition, we believe that, over time, our Hyperion solution, currently in the R&D phase, could enable further cost reductions that could bring sapphire solutions to cost parity with strengthened glass, further broadening the array of applications and actually increasing the demand for sapphire. Our early progress gives us added confidence that Hyperion will achieve these milestones.

Q2 2013

Well, I think there’s no gigantic bump in R&D for us to complete development of the project. I mean, we’ve moved around and prioritized our R&D spending accordingly. Hyperion is not a first-generation product. Hyperion is a follow-on second- and potentially third-generation product. And it won’t be the same as pure sapphire. There’s pure sapphire and then there will be these composite structures that will come out. And so we think it’s significant, but we don’t believe it will have an impact on first-generation adoption. It’s more of how does the — how do these applications unfold later. And Hyperion is — it is a tool that can be used with sapphire. But we’re just as excited, if not more excited about the applications of silicon carbide and silicon and other monocrystalline materials where, for example, silicon carbide wafer today and epi-ready wafer cost $800 to $900. We believe that we could substantially change that equation if we’re successful with silicon carbide lamina. So very exciting opportunities outside of sapphire, again, but not a short-term implication to it in the market.

Q3 2013

In support of the new materials business, we have accelerated the development of our next-generation launch capacity, low-cost ASF furnaces. Not only will these efforts support our initiative with Apple, we expect that it will enable the expansion of our LED, industrial and specialty sapphire businesses, positioning GT and its equipment customers as the industry’s lowest-cost sapphire producers. We’re very excited about the opportunities that lie ahead for our sapphire business.

Q4 2014

As strong as our sapphire opportunities maybe, the GT story is not just about our emerging sapphire business. In fact, our entry into the sapphire materials business may enable us to expand into other material segments whilst (sp?) we have fully ramped the operation in Arizona.

 

Full Disclosure: I am long GTAT and plan on using the money generated from this blog to buy additional shares of GTAT!

by Matt Margolis

In December 2013 PVA TePla of Wettenberg, Germany launched the baSiC-T physical vapor transport (PVT) crystal growth system (which uses sublimation of a source powder at high temperatures) for the mass production of silicon carbide (SiC) material.

The equipment announcement also indicated the current market for SiC crystals (see below)

Typical applications of SiC crystal include high-performance electronics for end-markets such as hybrid and electric cars and air-conditioning systems, as well as optoelectronics applications such as LEDs and DC/AC converters for photovoltaics.

The major advantage of silicon carbide material lies in the energy-saving potential of over 40% compared with conventional silicon components, says the firm. In addition, SiC can also be used at high temperatures and high voltages in excess of 10,000V, dramatically exceeding the potential of silicon.

PVA TePla says that the design of the baSiC-T system is based on a modular concept and allows the use of substrates (seeds) with a diameter ranging from 100mm to 150mm. Low operating costs and a high degree of automation facilitate inexpensive mass production of silicon carbide, the firm claims.

GT Advanced Technologies introduced their Siclone 100 furnace in July 2013, which could produce wafers up to 100mm in diameter. It appears that the competition has a 50mm wafer size advantage, but GT has the ability to couple their Siclone 100 furnaces with Hyperion to produce ultra thin wafers between 25 and 50 microns thick.

MERRIMACK, N.H., July 1, 2013 (GLOBE NEWSWIRE) — GT Advanced Technologies (Nasdaq:GTAT), today introduced its new SiClone™100 silicon carbide (SiC) production furnace. The SiClone100 uses a sublimation growth technique capable of producing high quality semiconducting bulk SiC crystal that can be finished into wafers up to 100 millimeters in diameter. In its initial offering, the SiClone100 is targeted at customers that have developed their own hot zone, qualified a bulk crystal production recipe and are looking to begin volume production.

My Obscure takeaway is that the Silicon Carbide (SiC) marketplace is beginning to take shape. Competition is a good thing because it means that companies are competing to win contracts within the SiC marketplace that has yet to go mainstream.

GT summarized the current marketplace in July at the time of the Siclone 100 product release.

The company continues to expect SiC furnace sales to contribute to less than 1% of its calendar year 2013 revenue and expects the SiC revenue ramp in 2014 and beyond to develop at a gradual pace given the lengthy design cycle associated with new power devices.

Keep an eye on the Silicon Carbide marketplace because the competition has arrived and I’m thinking SiC furnace orders will begin to be placed sooner rather than later. The biggest question that remains is who will dominate the SiC furnace marketplace?

Full Disclosure: I am long GTAT and have no plans to buy or sell anytime soon

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

Screenshot - 3_5_2014 , 10_51_47 PM

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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!

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

Matt Margolis -2/18/14

Kyma Technologies Background: Kyma Technologies was founded in 1998 and is located in Raleigh, NC.  Annual revenues are estimated at approximately $3m per year and they have 17 employees.   Kyma Technologies has managed to survive over the last 16 years through various venture capitalists funds raisers as well as several relatively small contracts awarded to them.  In 2003, Kyma received $1.4M from GE Technology Finance in the form of a line of credit to build out their gallium nitride substrates business.  Later in 2003, Kyma received $4m of Series B (venture capitalist money), which included support from Digital Power Capital and Siemens Venture Capital.  In 2011, Kyma landed a deal to will work with Veeco Instruments on a next generation LED manufacturing project funded by a $4 million award from the U.S. Department of Energy.   Less than 6 months ago in October, Kyma received an additional $3.2M of venture capitalist funding.

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This morning GTAT announced they had acquired exclusive rights from Kyma Technologies, Inc. for its plasma vapor deposition (PVD) process technology and know-how.  Based on the reading the announcement I believe GT will be paying Kyma a royalty fee based on units sold or a similar methodology.  I thought it would be interesting to compare the press releases from both companies GTAT and Kyma to see if there are any differences and sure enough there are!  Announcement from Kyma & Announcement from GTAT.

Analysis of opening statement: GTAT makes it very clear that they have acquired “exclusive rights” for Kyma’s plasma vapor deposition (PVD) process technology and “know-how”.    It sounds like GTAT not only gets the rights to the PVD system but also the IP (intellectual property) behind the technology.  Based on this language it appears GT will be paying Kyma an ongoing royalty fee for each PVD tool sold.  Kyma on the other hand only indicates that it has “licensed” the technology but does not state that it is an exclusive deal.

Opening statement from GTAT’s announcement is below:

GT Advanced Technologies (Nasdaq:GTAT) today announced that it has acquired exclusive rights from Kyma Technologies, Inc. for its plasma vapor deposition (PVD) process technology and know-how. The PVD of nano-columns (PVDNC™) technology developed by Kyma deposits a high-quality growth initiation layer of aluminum nitride (AlN) on wafers prior to gallium nitride (GaN) deposition. GT plans to commercialize a PVD tool that will complement its hydride vapor phase epitaxy (HVPE) system, which is currently in development. The combined offering will provide LED manufacturers with a higher throughput, lower cost solution to produce gallium nitride (GaN) templates on patterned or planar wafers. GT already has a high volume prototype tool incorporating Kyma’s PVDNC technology and expects to offer a production-ready tool in the first half of 2015.

Opening statement from Kyma is below:

Kyma Technologies, Inc., a leading supplier of advanced materials solutions that promote safety and energy efficiency, announced today that it has licensed its nitride semiconductor plasma vapor deposition of nanocolumns (PVDNC™) technology to GT Advanced Technologies.

Kyma has a rich history of advancing PVDNC™ technology to create a cost-effective nanocolumnar crystalline AlN nucleation layer on flat sapphire and silicon substrates as well as on patterned sapphire substrates. The nanocolumnar AlN presents an excellent surface for subsequent nucleation and growth of GaN buffer layers which are important for GaN LEDs and power electronics. Kyma has offered PVDNC™ AlN templates to the market for many years and also employs such templates as a starting material for growing bulk and thin film crystalline GaN by hydride vapor phase epitaxy (HVPE).

Analysis of closing statement: GTAT states they manufacturers will be able to “increase the throughput of their existing LED production lines and lower the capital expenditures…” while Kyma says that the (PVDNC) technology has the “potential to double the throughput of today’s MOCVD tools.”  It’s very interesting that GTAT went light on the technology benefits but Kyma wanted to make sure everyone knew this could double the throughput.

Closing paragraph from GTAT is below:

Today, GaN deposition on epi wafers is done in slower and more expensive MOCVD tools. By utilizing the combined PVD and HVPE processes to create low cost GaN templates, manufacturers will be able to increase the throughput of their existing LED production lines and lower their capital expenditures because they will need fewer MOCVD tools.

Closing paragraph from Kyma is below:

PVDNC™ technology is an excellent complement to GT’s recently announced move into HVPE equipment. The combination of PVDNC™ AlN nucleation layers and HVPE GaN buffer layers has the potential to double the throughput of today’s MOCVD tools and to improve the performance and yield of devices. The result is higher throughput of improved devices made at lower fabrication cost, a triple win for the customer.

One more omission from the GTAT announcement completely that was in Kyma’s announcement was but “also into the nascent market for nitride based power electronics”.  GTAT only mentions this deal in relation to LED but it may be one of the “secret” weapons for Power Electronics which is one of the 4 business swim lanes.  Slides pulled from the recent corporate overview support my theory above that this deal with Kyma is for LED as well as Power Electronics related to Silicon Carbide Systems as well as end market Power Systems for Electric Vehicles.

2014 Slide 4

2014 Slide 4

2014 Slide 4

2014 Slide 4

The Kyma100 HVPE Specs are below

Kyma100 HVPE System Specs

Kyma100 HVPE System Specs

This is a interesting fact sheet from Kyma and their focus on Support of Wide Bandgap Semiconductor Power Electronics including  Silicon Carbide (SiC).

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My takeaways:

  • GTAT acquired exclusive rights for Kyma’s PVD Tool and IP (Intellectual Property) associated with it
  • PVD tool can double the throughput of today’s MOCVD tools
  • GT plans to commercialize this tool beginning in 2015 partnered with their HVPE system in development for LED
  • PVD tool will also benefit SiC and Nitride Based Power Electronics (Power Systems for Electric Vehicles)

Mitsubishi Electric announced on December 25, 2013 that it launched a railcar traction inverter system for 1,500V DC catenaries that incorporates the world’s first all-silicon carbide (SiC) power modules made with SiC transistors and SiC diodes. The all-SiC inverter greatly reduces power loss, size and weight compared to conventional insulated gate bipolar transistor (IGBT) power modules and hybrid power modules made with Si transistors and SiC diodes.  Size and weight can be reduced 65% compared to conventional inverters with IGBT power, total energy consumption is reduced 30%.

The new traction inverter system’s switching loss is approximately 55% less than Mitsubishi Electric’s conventional inverter system incorporating IGBT power modules. The new system also increases regenerated energy through the use of regenerative brakes in all speed ranges. Thanks to these solutions, total energy consumption of railcar systems, including their motors, is reduced by about 30% compared to conventional systems.

Size and weight are reduced by about 65% compared to conventional inverter systems with IGBT power modules and about 30% compared to existing hybrid inverter systems with SiC diodes.

The dielectric strength voltage of SiC is about 10 times greater than that of Si (Silicon). SiC devices can operate at higher temperatures than Si devices because of the high breakdown voltage and low conduction loss of thinner semiconductors. Unlike the ongoing development of SiC diodes, development of SiC transistors has proven difficult due to problems with crystal preparation, which requires highly advanced insulation and package technologies capable of withstanding high temperatures. Mitsubishi Electric’s R&D and production units combined their respective expertise in semiconductor development and manufacturing to successfully develop the new large-capacity, all-SiC power module with MOS-FET for use in the world’s first all-SiC railcar traction inverter. Development of SiC power modules has been partially supported by Japan’s New Energy and Industrial Technology Development Organization (NEDO).

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It looks like SiC (Silicon Carbide) use is beginning to take off.  A report released a few days ago from semiconductor today highlighted the release of Mitsubishi Electric Corp and their development of a built in silicon carbide inverter.  The electric vehicle motor drive system will reduce the size of the motor and increase the passenger space and improve on energy efficiency and most likely fuel economy as well.  Complete details are below

Tokyo-based Mitsubishi Electric Corp has developed a prototype electric vehicle (EV) motor drive system with a built-in silicon-carbide (SiC) inverter.

Reckoned to be the smallest of its kind, the EV motor drive system is intended to enable manufacturers to develop EVs offering more passenger space and greater energy efficiency.

MitsubishiGlobal demand for EVs and hybrid EVs (HEVs) has been growing in recent years, reflecting increasingly strict regulations for fuel efficiency and growing public interest in saving energy resources and reducing carbon dioxide emissions, notes Mitsubishi Electric. As EVs and HEVs require relatively large spaces to accommodate their robust battery systems, there is a strong need to reduce the size and weight of motor systems and other equipment to ensure sufficient passenger space, the firm adds.

Mitsubishi Electric says that, with an integrated all-SiC inverter, its new prototype EV motor drive system has been downsized further (to 14.1L, for 60kW) due to having a smaller motor, resulting from improved thermal resistance between the motor drive system and cooling system. The system is equal to existing EV motors in power and volume, enabling replacement.

Mitsubishi Electric also highlights improved motor cooling performance, since the cooling system for both the motor and inverter are integrated due to the cylindrical shape of the power module accommodating parallel cooling ducts for motor and inverter. This ensures stable cooling with even a low-power pump.

Mitsubishi Electric plans to commercialize its new EV motor system after finalizing technologies for motor/inverter cooling, as well as downsizing the dimensions further and increasing efficiency.

Courtesy of wdam.com (see full details below) I was able to find a nice definition of Silicon Caribide as well as the current uses it has today and where the growth will occur in the future. Silicon carbide is produced synthetically by blending petroleum coke and sand under high temperature and pressure.  Industrials have used silicon carbide for blades, drill tips, and abrasive surfaces for polishing have been manufactured from silicon carbide as a cheaper alternative to diamond and diamond dust.  Due to the voltage-dependant resistance offered by SiC, the material has been used in lightening arresters and provides safe transfer of high voltages of electricity from lightening as it strikes the earth.  Steel and energy, electronics and semiconductors and automotives are the major end-user segments that have shown high demand for silicon carbide.  Medical & healthcare is expected to show the highest growth between 2013 and 2019 along with automotives.

Silicon carbide (SiC), also known as Carborundum is an exceptionally hard material that occurs in minor quantities in the Earth’s crust. It can also be manufactured synthetically by blending petroleum coke and sand (silica) under high temperature and pressure conditions. Diamond, boron carbide and boron nitrate are some of the substitute materials of silicon carbide that also possesses high hardness properties.

Owing to its hardness, silicon carbide has been extensively used as an abrasive material for various industrial applications. Blades, drill tips, and abrasive surfaces for polishing have been manufactured from silicon carbide as a cheaper alternative to diamond and diamond dust. Silicon carbide is also used as a structural material in composite armor, as ceramic plates in bullet-proof vests and in Dragon Skin, an armor device that uses silicon carbide disks as an integral part of its design. Due to the voltage-dependant resistance offered by SiC, the material has been used in lightening arresters and provides safe transfer of high voltages of electricity from lightening as it strikes the earth. Similar properties also helped advance their application in electrical circuits, and silicon wafers have been used on a large scale in electronics and semiconductors in the past few decades.

The SiC market was dominated by black SiC and green SiC and they accounted for over 90% of the total silicon carbide product segment in 2012. Black silicon carbide is majorly used in steel manufacturing to increase outputs of steel and recycled steel. Coated SiC, refractory SiC, metallurgical and metallurgical briquettes and SiC micro grit account for a smaller part of the market share and are used in some high-performance applications. Although black and green SiC dominate the SiC product segments, they are expected to show favorable growth in the forecast period.

Due to their exceptional physical properties and their versatility of application, they find diverse application bases in various end-user industries. Steel and energy, electronics and semiconductors and automotives are the major end-user segments that have shown high demand for silicon carbide. Together, these three end-user segments accounted for more than 70% of the market in 2012. Medical & healthcare is expected to show the highest growth between 2013 and 2019 along with automotives.

The preview of the Transparency Market Research report on the Global Silicon Carbide Market is below.  The major applications for SiC include Automotive, Aerospace, Military, Electronics, Healthcare, Steel and Energy Applications.  The relative size of the market is summarized a follows: 
According to the report, silicon carbide demand was over USD 1.45 billion in 2012 and is expected to reach USD 3.82 billion by 2019, growing at a CAGR of 15.3% from 2013 to 2019. In terms of volume, silicon carbide consumption is expected to reach 2,377.1 kilo tons in 2019, growing at a CAGR of 14.5% from 2013 to 2019.
Below is the full preview from Transparency Market Research:
Global Silicon Carbide Market – Industry Analysis, Size, Share, Growth, Trends and Forecast, 2013 – 2019
Transparency Market Research Report Add “Silicon Carbide (Black SiC, Green SiC) Market for Automotive, Aerospace, Military, Electronics, Healthcare, Steel and Energy Applications – Global Industry Analysis, Size, Share, Growth, Trends and Forecast, 2013 – 2019” to its database.

Albany, NY, January 11, 2014 –(PR.com)– Transparency Market Research has released a new market report titled “Silicon Carbide (Black SiC, Green SiC) Market for Automotive, Aerospace, Military, Electronics, Healthcare, Steel and Energy Applications – Global Industry Analysis, Size, Share, Growth, Trends and Forecast, 2013 – 2019”. According to the report, silicon carbide demand was over USD 1.45 billion in 2012 and is expected to reach USD 3.82 billion by 2019, growing at a CAGR of 15.3% from 2013 to 2019. In terms of volume, silicon carbide consumption is expected to reach 2,377.1 kilo tons in 2019, growing at a CAGR of 14.5% from 2013 to 2019.

Browse the full report:
http://www.transparencymarketresearch.com/silicon-carbide-market.html

Growing demand in the steel manufacturing and steel recycling industries and the dependence of electronics & semiconductors on silicon carbide are factors that are expected to drive SiC demand over the next five years. High level of precision involved in the manufacture of components and low tolerance specifications in their applications are expected to be key challenges for market participants in the coming years.

Black and green SiC were the dominant product segments, and accounted for over 90% of the overall market share in 2012. Black SiC is expected to continue holding its market position in the near future and is expected to grow at a CAGR of 15.4% between 2013 and 2019. Green SiC consumption is expected to reach 656.1 kilo tons by 2019. Coated, refractory and metallurgical SiC along with metallurgical briquettes and SiC micro grit accounted for a smaller part of the market with applications in high-performance applications.

Silicon carbide is primarily used in steel & energy, automotives, aerospace & aviation, military & defense, electronics & semiconductors and medical & healthcare end-user segments. Steel & energy showed the highest demand for silicon carbide in 2012 and accounted for more than 28% of the market. Electronics & semiconductors and automotives were the other major segments for the material and are also expected to show strong demand in the near future. Medical & healthcare is expected to show the most demand for silicon carbide during the forecast period and is expected to grow at a CAGR of 15.6% between 2013 and 2019.

Asia Pacific was the largest market for silicon carbide in 2012 and accounted for more than 50% of the global demand. Steel & energy, electronics & semiconductors and automotives were the major markets driving sales for silicon carbide in Asia Pacific, making it the largest market in terms of volume. Asia Pacific and RoW are expected to be strong future markets for silicon carbide owing to growing industrialization and infrastructure. SiC demand in North America and Europe is expected to reach 249.6 kilo tons and 375.6 kilo tons by 2019 respectively. ESK-SIC Gmbh, The Dow Chemical Company, Grindwell Norton Ltd. AGSCO Corporation, Entegris Inc., Norstel AB and Gaddis Engineered Materials along with others were key market participants in the SiC industry.

Silicon Carbide Market: End-user Analysis
Steel & energy
Automotives
Aerospace & aviation
Military & defense
Electronics & semiconductors
Medical & healthcare
Others (Chemicals, fabrication etc.)

According to a Sic Wafer market overview (January 2013) provided by researchandmarkets SiC wafer market is expected to annually by approximately 38% expanding from $59m in 2013 to $553m in 2020.    SiC powered devices can consume a fraction of the energy that silicon power devices consume as well as add to system stability and reliability.   Below are some details provided by researchandmarkets (link is above).

 

Since power semi-conductors, which are used in power supply units or power converters to save energy and reduce product sizes, play a great role in improving energy efficiency, system stability and reliability through unique functions, they are expected to contribute to solving the global issues in environmental production and energy saving.

In particular, SiC power devices, which theoretically consume 1/100 of the energy conventional silicon power devices do, are expected to save energy drastically. In addition, since they can not only save system costs but also be used under extreme conditions, when applied as high temperature devices, a great ripple effect is expected. Due to the excellent properties, SiC semi-conductor technologies have reached a significant level, and single crystal substrates have already been deployed in a commercial level in technologically advanced countries such as the United States, Japan, and Europe SiC semi-conductor devices. These countries are spurring research through huge projects.

Accordingly, power semi-conductor companies are already accelerating commercialization of SiC power devices, strengthening cooperation with SiC wafer manufacturers. The Japanese company, Rohm, which announced its plan to use SiC for all power semi-conductor production, acquired a 74.5% stake in the German SiC substrate manufacture SiCrystal from Siemens in 2009. The specialized semi-conductor application company, Power Integration, has developing applications for and HEVs and EVs, and inverters for PV/wind power generation, since it strategic investment ($30 million) into the U.S. SiC manufacturer, SemiSouth Laboratories, in 2010.

Thus, the global SiC Wafer market is expected to grow from a $52.6M business in 2012 into a $58.6M business in 2013. The market is expected to continue to grow rapidly with the annual growth rate of 2801%, hitting $87.9M in 2015 and $552.5M in 2020.

This report is dedicated to examining SiC technologies from SiC powder to pellets and single crystals, and analyzing the current SiC single crystal growth technologies and industry trends. In addition, it provides forecasts for the SiC market and each SiC wafer application market until 2020.

This report is expected to be a good help for SiC Wafer and power-semiconductor manufacturers, and companies considering market entry into related industries.