What Are Apple’s Sapphire Plans?

Source: Apple.com

Apple’s (NASDAQ:AAPL) recently revealed partnership with sapphire crystal manufacturer GT Advanced Technologies (GTAT) has sparked speculation that the iPhone maker will begin using sapphire as the primary material for its mobile device touchscreens. As reported by Seeking Alpha, Apple has even provided GT Advanced Technologies with a $578 million pre-payment as part of its effort to secure a reliable source of sapphire.

Although Apple currently uses Corning’s (NYSE:GLW) Gorilla Glass for its devices’ touchscreens, the scale of Apple’s deal with GT Advanced Technologies has led some tech commentators to speculate that Apple will ditch Gorilla Glass entirely in favor of sapphire. While this possibility cannot be ruled out, there are several notable difficulties with sapphire that would seem to make its wholesale adoption unlikely. Although sapphire is “thinner, stronger, and more scratch-resistant,” it is also more expensive to produce, more difficult to polish, and harder to cut.

For these reasons, Cantor Fitzgerald analyst Brian White believes that Apple is not likely to abandon its use of Corning’s Gorilla Glass anytime soon. On the other hand, White believes that sapphire will become an increasingly important material for future Apple devices. “We do not expect sapphire to replace Corning’s Gorilla Glass on the iPhone or iPad in the coming quarters. However, we believe sapphire could gain traction in new small form factor applications or high-end devices with Apple in the future,” noted White via FairerPlatform.

Since sapphire is already used in some luxury wristwatches, some industry watchers have speculated that Apple will be using most of its sapphire production for the long-rumored iWatch. Although he believes a sapphire-covered iWatch is a possibility, FairerPlatform’s Ron Carlson noted that Apple may also be planning to expand its current use of sapphire as a protective cover for the Touch ID fingerprint scanner.

In other words, Apple may be planning to release even more Touch ID-enabled devices in 2014. Carlson noted that this would align with predictions made by Morgan Stanley analyst Katy Huberty, who believes Apple will expand the use of Touch ID as a way to leverage new services revenue streams.

“Combining 575M+ high-end consumer accounts (most linked to credit cards or ACH) with investments Apple is making in cutting edge hardware, like the fingerprint sensor, and upgrading its installed base to the latest versions of iOS and OS X sets up for new services revenue streams, in our view,” wrote Huberty via MacRumors. Finally, there is also the possibility that Apple has developed a completely unknown product that requires a significant amount of sapphire. Here’s how Apple has traded over the past five trading sessions.

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