Why Apple’s new sapphire manufacturing agreement is a big deal

“Earlier this week, Apple announced a multiyear alliance with GT Advanced Technologies that will see the company manufacturing sapphire material at a new Apple facility in Mesa, Ariz.,” John Paczkowski reports for AllThingsD. “With prepayments of approximately $578 million to GT, this is a significant deal for both companies — perhaps even more so than originally thought.”

“During a Monday earnings call, GT revealed a few bits of data that suggest it is rejiggering its entire business model around sapphire production,” Paczkowski reports. “As Cantor Fitzgerald analyst Brian White noted today, GT’s sapphire business accounted for 11 percent of its year-to-date sales — about $28.9 million in revenue. But, in forecasting 2014 revenue, the company said it expects to make $600 million to $800 million, with 80 percent of those sales attributable to its sapphire business.”

Paczkowski reports, “In other words, following the signing of this new deal with Apple, GT’s sapphire segment will not only become the company’s main source of revenue, it will also drive a stratospheric spike in it.”

Read more in the full article here.

Related articles:
GT Advanced Technologies spikes on sapphire deal with Apple – November 5, 2013
Apple expands ‘Made in USA’ efforts with sapphire glass factory in Arizona, creating over 2,000 jobs – November 4, 2013
Apple strikes sapphire supply deal with GT Advanced – November 4, 2013
Gorilla glass maker Corning enters into strategic partnership with Samsung Display – October 23, 2013
Sapphire glass may be used in 2014 iPhone Retina display, sources say – September 18, 2013
Vertu COO: Apple investigated sapphire crystal displays, but found them infeasible at this time – June 13, 2013
Corning’s Gorilla Glass vs. sapphire for mobile touch displays – May 28, 2013
Apple’s next iPhone screen could be made of Sapphire – May 2, 2013
Steve Jobs, steel balls and Corning’s Gorilla Glass (with video) – January 11, 2013


    1. I think new and exciting things may come from their partnership sooner rather than later.

      An Apple designed TV here we come!!!
      An entire panel of synthetic sapphire used for the screen with a sapphire laser used to produce and emit photons using the natural crystalline substrate of the synthetic sapphire display. The very first laser TV!!

      Sapphire is highly transparent to wavelengths of light between 150 nm (UV) and 5500 nm (IR). The human eye can discern wavelengths from about 380 nm to 750 nm. Not only that, but some of the first lasers ever were built with synthetic sapphires.


  1. It sure is a big deal, my it’s actually factual details and projections of a real Apple-someone else interaction. It’s refreshing to read some real news and a nice break from the wild, off the mark speculations and arm chair coaching that are so common in today’s journanalystic world, like Apple should buy this company or a brand like Blackberry and make a low cost phone.

    Way to go Apple, and wow, someone reporting the news, I’m feeling very good.

  2. Who owns the factory in Arizona: Apple or GT Advanced Technologies?

    I was under the impression that it was not an Apple factory but Apple is provided a loan for construction and equipment.

    1. The article says “GT [GTAT] shares surged nearly 21%. The company said Monday it reached a deal with Apple where GT will produce sapphire material at an Apple facility in Mesa, Ariz.,” Chang and Vaishampayan report.”

      So, I take that to mean the facility will be owned by Apple, and operated by GT. I’m guessing the $500m advance is for them to acquire the equipment to populate the building, which they’ll repay to Apple from their profits over the coming years. Essentially, Apple appears to be building a facility to manufacture sapphire glass, and hiring the patent holder to do the actual work under license. All assumptions on my part based on the sketchy news quote, however.

      1. That makes a lot of sense. Apple makes the investment to increase output (which GT cannot afford). GT gains a stable contract with Apple which provides them with financial security and stability for years to come, as well as a strong base from which to grow. I love win-win scenarios in which both partners benefit.

    2. It would be interesting to learn more about the deal. Given the potential strategic importance of this deal (potentially far more than the liquid metal exclusive agreement, which has not yet amounted to much), I would have thought that Apple would try to buy the company and its IP outright to prevent anyone else from jumping into the deal downstream (like with Corning Gorilla Glass and Samsung). But Apple often seems content to work with a company cooperatively rather than acquiring and assimilating every aspect of its ecosystem. Sometimes that backfires on them (e.g. Google), but it is also a strength because companies know that Apple will deal squarely and fairly with them as long as they do so in return.

      Somehow or other, I am sure that Apple has secured the necessary long term rights and access to the sapphire material. From a financial standpoint, Apple is run very conservatively. That is one of the things that I admire about the company – even with a $150B bankroll, Apple does not blow $B on risky major acquisitions. So I am confident that Apple has a plan with respect to its relationship with GT Advanced Technologies and its $578M investment.

    3. 1. Apple is constructing and will own the building.

      2. They will loan GTAT the capital needed to build/buy all the equipment needed and staff the facility.

      3. GTAT will run the operation and over the next 4 or 5 years repay Apple.

      4. During this time Apple will have exclusive rights to all output from the facility.

      Personally, I think this is EXACTLY what Apple needs to do with their A series of SoCs… Partner with GlobalFoundries.

  3. would someone be so kind and direct me to an explanation of sapphire, the material substance ..and, why it has this kind of exponential potential. maybe, that’s an exaggeration, i don’t know, but, from all the talk, it’s as though it’s gonna have other more mysterious applications for apple. or, maybe, i’ve been watching too many episodes of ancient astronauts. idk.

    1. The only thing harder is diamond, but sapphire can be created, cut and used at reasonable costs. It’s regularly used for watch faces. Shouldn’t be too hard to find details online.

    2. It’s an extremely hard material which makes it extremely scratch resistant, which is why it is excellent for camera lenses. I have read though that it is also fairly brittle and does not bend. These two points are where Gorilla Glass may have an advantage.

      However, given the size of the investment here, I’m sure Apple has been working with this company for a while now to perfect whatever it is they’re going to be doing on such a mass scale.

      Who knows? Maybe they figure out how to make the material less brittle but retain its hardness?

  4. GT are jumping on this since it won’t be too long that some other material comes out that is stronger.
    Tech suppliers need to make money as soon as their product becomes in demand. Unless they continue to improve their products the competition will come out with something else.
    Look at blackberry. They rested on their laurels and now are almost of of business.
    Also Corning must be pissed. One of their biggest customers may soon be jumping ship.

  5. It’ll become another one of Apple’s vague acquisitions that Wall Street investors won’t quite understand. I’m sure they’re already scratching their heads wondering exactly what Apple is going to do with a mountain of synthetic sapphire. Maybe they’ll think Apple is going into the jewelry business. iNecklace and iBracelet for the chic Apple consumer.

    I’d consider it a worthwhile investment if scarce sources of synthetic sapphire are proving to be a problem for Apple’s future plans. Tens of millions of Touch ID sensors would likely be difficult to manufacture without sufficient supplies of sapphire. It would be nice if Apple could corner the synthetic sapphire market considering Apple has plenty of cash to toss around.

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