Here’s the Latest Evidence for Apple’s Sapphire Ambitions

Source: Thinkstock

It appears that Arizona isn’t the only state that will produce a crucial component for Apple’s (NASDAQ:AAPL) next generation of iDevices. GT Advanced Technologies (NASDAQ:GTAT) recently submitted an amended 10-Q filing that revealed the company has dedicated a second plant located in Salem, Massachusetts, to manufacturing sapphire for Apple. The new details about Apple’s second sapphire plant were first highlighted by Matt Margolis, a PTT Research analyst who is well known for his investigative research on Apple’s partnership with GT Advanced Technologies.

Apple’s interest in using sapphire as a protective covering for its mobile devices first became apparent when GT Advanced Technologies revealed in its quarterly earnings report in November that the iPhone maker had made a $578 million investment in a sapphire manufacturing facility that it runs in Arizona. Subsequent research conducted by Margolis indicates that more than 2,500 furnaces have been installed in the Arizona-based plant, and that “the maximum sapphire screen capacity of the Mesa facility is likely to exceed 200m annual units.” As noted by Margolis, via Seeking Alpha, this suggests the Mesa plant could produce enough sapphire “to cover the iWatch, the 4.7″ iPhone and the 5.5″ iPhone with full sapphire cover glass in 2014.”

The latest information in GT Advanced Technologies’ amended 10-Q filing shows that Apple’s initial $578 million investment was also used to equip and retrofit a 50,000-square-foot sapphire facility located in Massachusetts. Per the amended 10-Q filing, GT Advanced Technologies has been growing sapphire boules for Apple at this facility since the fourth quarter of 2013.

Source: gtat.com

Margolis noted that the Massachusetts-based sapphire plant also likely has several hundred furnaces, reports Seeking Alpha. The additional sapphire supply and furnaces could boost Apple’s sapphire screen production by another 20 million units, per Margolis’s calculations. This would bring Apple’s total potential annual sapphire production to 220 million screens, more than enough to provide sapphire coverings for all of the company’s iPhones, as well as any peripheral devices, such as the rumored iWatch.

Besides showing that Apple’s sapphire partnership with GT Advanced Technologies was even larger than what was previously known, the recent filing also revealed that the company’s sapphire production plans appear to be on schedule. According to Margolis’s research, GT Advanced Technologies activated 140 sapphire furnaces and began producing sapphire for Apple at the Arizona-based plant on January 10.

The latest information offers further evidence that Apple’s next-generation mobile devices will feature sapphire display covers. The use of this durable, more scratch-resistant material may give Apple a technological edge over other smartphone makers — for a while, anyway. Last month, insider industry sources cited by Korea’s ETNews suggested that Samsung (SSNLF.PK) and LG were both looking into sapphire due to Apple’s interest in the material.

On the other hand, Samsung and other competitors may find it more difficult to implement sapphire coverings in their products due to the prohibitive cost of the material. According to ETNews, sapphire is 10 times more expensive than conventional display materials.  However, an Apple patent published last year suggested that the Cupertino, California-based company may have developed a low-cost method for producing sapphire. In a patent titled “Sapphire Laminates,” Apple outlined a more efficient method for manufacturing sapphire that could result in significant savings in production costs.

Source: iWatch Concept by Todd Hamilton

It should be noted that Apple already uses sapphire as a protective covering for the Touch ID fingerprint scanner and the iPhone’s camera lens. However, the scale of the sapphire production facilities that Apple has secured in Arizona and Massachusetts suggests that the company is ramping up for a new and expanded use for its sapphire supply.

Apple’s recently expanded sapphire production capabilities also align with a recent research note from Cowen and Co. analyst Timothy Arcuri, reports Investor’s Business Daily. According to Arcuri’s supply chain sources, both of the larger-screen iPhone 6 models will be offered with sapphire displays. However, he also suggested that some versions of the iPhone 6 may continue to use the Gorilla Glass made by Corning (NYSE:GLW). Either way, Apple fans will most likely have a chance to get their hands on a sapphire-covered iDevice this fall, when the company is expected to release two iPhone 6 models with larger screens, as well as a wrist-worn wearable tech device known as the iWatch.

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