Mesa, Arizona mayor woos Apple; new sapphire facility capable of producing 2X current worldwide capacity

“Arizona got snubbed by Apple Inc. in 2012 when the iPhone maker picked Texas to build a new operations hub. Scott Smith, the mayor of the Phoenix suburb of Mesa, was determined to keep history from repeating itself,” Adam Satariano reports for Bloomberg. “So last year, when Apple was searching for a place to house a factory that makes a stronger glass for its gadgets, Mesa pulled out the stops. The city, which was ravaged by the 2007 housing crash, offered tax breaks, built power lines, fast-tracked building permits and got the state to declare a vacant 1.3 million-square-foot facility that Apple was exploring a foreign trade zone. With unemployment high, such are the lengths that towns are willing to go to to lure the world’s most valuable company. ‘Any time you have a company like Apple come in and invest in your area, especially with this type of operation, it’s significant,’ said Smith, who triumphed late last year when Apple spent $114 million to buy the factory. The mayor celebrated by placing bowls of green and red apples in City Hall.”

“Yet even as Apple prepares to open the facility with 700 full-time jobs this month, along with another 1,300 temporary construction jobs, its arrival is no panacea for the region around Phoenix that refers to itself as Silicon Desert. According to Smith, the area lost about 300,000 jobs after the 2007 housing market crash, with only about half of those coming back,” Satariano reports. “‘The recovery is happening slowly,’ Smith, a Republican who is running for Arizona governor, said in an interview.”

“Apple’s Mesa facility is an example of the kind of manufacturing where the U.S. can be competitive. The factory, which Apple is operating with GT Advanced Technologies Inc., will focus on a material called synthetic sapphire, which is used to make watches and solar cells and strengthen iPhone screens,” Satariano reports. “The material requires furnaces to spark a reaction in which cylinders of sapphire grow over about a month, then can be sliced to less than a millimeter thick for use on gadget screens, said Eric Virey, an analyst with Yole Developpement, a research firm that studies the market. Apple’s Mesa plant will make an ‘unprecedented’ amount of synthetic sapphire, Virey said. ‘When it’s operating at full capacity, this plant is going to be producing as much as two times the current worldwide capacity,” he said. The factory will be able to make enough sapphire for 80 million to 100 million iPhones a year, he said.'”

“An Arizona state public-private group called Arizona Commerce Authority gave Apple a $10 million grant for building improvements and to help with job recruitment. Apple also won the ability from the state to designate the area around the factory a foreign trade zone, which lets it cut property taxes by more than 70 percent,” Satariano reports. “Apple and other companies typically get tax breaks in states where they add operations. Apple had received more than $135 million in incentives from state and local governments to build data centers in Nevada, Oregon and North Carolina, according to announcements of those projects. Texas gave the iPhone maker about $30 million in 2012 for the operations center it’s building there.”

Read more in the full article here.

[Thanks to MacDailyNews readers too numerous to mention individually for the heads up.]

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  1. I’m going to be rather interested in how the news media is going to spin this plant into a negative for Apple. I’m sure they’ll find a way. I hope the manufacture of synthetic sapphire doesn’t have any links to cancer or something of that nature. There has to be some way the smartphone industry will figure out how to undermine Apple’s use of sapphire in its iPhones. Apple will be accused of driving up consumer costs unnecessarily. I just hope whatever Apple uses the sapphire for will send the rest of the Android rival manufacturers into a death spiral when they try to copy Apple and realize they can’t obtain enough of it or the costs are too high.

    Guaranteed, the rest of the smartphone industry will be going with some new Gorilla Glass displays costing half as much as Apple’s sapphire solution. They’ll say the Gorilla Glass is just as good if not better and that will be the end of Apple’s supposed advantage.

      1. Currently, your estimate of roughly 10x is about right – a few $ for a GG display cover versus $20 to $30 for sapphire. But economies of scale play a role in this calculation going forwards. Apple is procuring the very latest sapphire production furnaces and all of the sapphire output will be “at cost” to Apple since it will be internally sourced. So it is very possible that the cost to Apple will be around 3x of GG, not 10x.

        As has been noted several times before, people are already paying $10 to $30 extra for screen protector films and such. I have no doubt that most people would be more than happy to pay a modest premium (say $15 to $20) to get a premium sapphire cover material on a premium smartphone, the iPhone.

        Your incessant, ill-considered pessimism is rather puerile given that it has been refuted on multiple occasions. You should talk to your better half, BRN, while you are just hanging around doing nothing.

        1. Hey QueenSmell, there are so many logical fallacies with your argument I don’t know where to start. But I’ll just address one because you have written a load of rubbish as far as I can see.

          No company, be it a subsidiary or an independent, prices materials output at cost. All companies price output close to what the market price would fetch, even if it’s for internal pricing purposes. Otherwise the IRS will get you for artificially depressing prices to transfer profits to offshore entities. That’s just one flaw in your argument.

          And you cannot possibly reward or incentivise the workers and employees at the GT Advanced sapphire glass manufacturing plants if you have no idea what profits/losses the company is making because you are artificially depressing prices to ‘at cost levels’. And lastly the sapphire glass is supplied to Foxconn which has to calculate the overall assembly cost of the iPhone. By artificially depressing prices you are not giving a fair comparison to the acquisition cost of the sapphire glass plants, depreciation of plants over time, technology investments, R&D, bonuses that are tied to plant performance, and other financial incentives due to the company and its workforce.

          Your answer is stupid at best. I won’t bother analysing the rest of your reply because obviously you don’t live in a capitalist economy but in a socialist paradise.

      1. Braodcom announced a new inexpensive LTE chip they’re working on and testing. We could see inexpensive LTE cell phones later this year. This will only place more pressure on Apple’s iPhone business.

      2. Actually, BLN, millions of people would probably pay that much for an iPhone 6 with a sapphire display cover. But, since you are pulling that statement out of Ballmer’s nearby sphincter, we don’t need to waste any more time with you and your squam.

        1. At anything approaching that price, probably a couple of million users world wide would purchase the iPhone 6. In the meantime, Apple’s stock would tank.

        2. No, QueenSmell, they would not. A case dispenses with the need for a screen protector. Besides, screens shatter due to being dropped. This is knowns as stress fracture that is caused by a sudden external force being applied to the glass causing it to crack.

          Gorilla Glass has better resistance to cracking/breaking than sapphire glass so that renders your whole argument moot. A case would solve 99% of the problems with scratching.

          Another rubbish argument from the resident idiot.

    1. Gorilla Glass is strong and can withstand much more pressure than Sapphire Glass before it shatters. Sapphire Glass basically won’t scratch, whereas the strongest Gorilla Glass still can.

      1. There are many material factors that must be considered when designing an iOS device. No material is perfect, so there are always compromises in the end.

        I don’t drop my phone, so I am far more concerned about scratches than impact resistance. Sure, I would like a mechanically tough material, but I would prioritize scratch resistance over absolute toughness. You will see Android handset vendors make the opposite argument, because that is all that they can do – they will not have the option of sapphire in sufficient quantities anytime soon. So they have to make what they have sound as good or better than the alternatives.

        Apple may actually be able to laminate a very thin layer of sapphire over another substrate, such as GG, to blend the best elements of both materials.

        1. QueenSmell do you live in your mom’s basement? AppleCare covers the cost of the screen breaking/cracking due to the owner dropping the iPhone (accidental handling) but not against scratches. A scratched screen is considered normal wear and tear and is not compensated against.

          So what costs Apple more to replace? A broken or scratched screen? Gorilla Glass offers better protection against broken screens.

          Your entire argument is premised on not analysing the facts but on something that is pulled from your backend orifice.

    2. News flash: Apple manufactures glass that can (with enough force) break into shards that may cut many users and cause death if they get pieces of it and slice into large veins and arteries. Some babies may be harmed if they find these shards and swallow them. Many world leaders use iPhones and may be subject to these horrific glass shards which could cause death and therefore cause World War III.

  2. “Apple also won the ability from the state to designate the area around the factory a foreign trade zone, which lets it cut property taxes by more than 70 percent”

    Apple made part of its massive fortune by saving labor, tax and other incentives by having factories overseas is now getting tax cuts and other incentives to open a factory employing 700 workers in the US. Arizona can ill afford this lack of income considering its weak economy. Apple may not pay taxes but its 700 workers will pay Arizona’s state income tax.

      1. A government, be it local or fed always has to have the best interest and sovereignty of its citizens and the country. A business only needs to worry about their shareholders or their bottom line. A business can fail, a government can’t fail. That’s why we have laws and more importantly, we have elections at the local and federal level to correct past errors. There will be corrections during the next elections.

        1. A government can’t fail? Have you seen Detroit lately? Greece? While there may not be some obvious penultimate government state as with business, there are plenty of measures by which most would agree that a government would have most certainly failed.

        2. Detroit went into bankruptcy as part of a restructuring plan. Unlike what Rush says, Detroit was a one horse or one business town. When GM, Ford & Chrysler began failing it took Detroit down with them. It doesn’t help that Detroit has now assigned an emergency manger that can override elected officials, even election results; thanks republicans. That’s big American “dinosaur brains” business for you.

          Failure would be be closing doors and placing a For Sale sign on a building. Greece also filed for bankruptcy in order to restructure. Of course, Greece is not the US. They have their own problems.

        3. I respect your position. You make a good point. But I would suggest that it is still a bottom line issue. If a government can make a call that allows it’s citizens a greater chance of finding work, then they should take that path. The more jobs in their neighbourhood the more money rattles around in the economy. The better the jobs, the more the money enhances the economy. If they have to give up a little tax revenue in order to gain several times the economic stimulus, perhaps they should.
          Thanks for your comment.

    1. So, Arizona can’t afford the tax cuts and incentives to get 700 permanent jobs, so somehow empty houses and factories would be better? If the economy is weak, it seems obvious that you’d want to do things to make the economy better. 700 jobs added to the economy seem to be better than 0 jobs added to the economy.

      The fact is that Apple was going to set up shop somewhere. Mesa and Arizona are clearly better off if Apple sets up in Mesa than they would be if Apple had set opened a factory in Texas or North Carolina.

      Or, is there some alternate reality I don’t know about where closed, empty factories are a good thing.

  3. Great, 700 new jobs among hundred’s of thousands lost. Meanwhile, probably the richest company on earth outside of oil is paying a fraction of taxes and other incentives while government coffers remain near empty. Workers pay while the corporations makes out like a bandit. That’s republican economics 101.

  4. Millions of Americans have lost their job under the current president.

    Hmmm, could that possibly be Democratic economics 101?

    The real unemployment rate is NOT counted in the labor dept. metric.

    FOCUS on the FULL picture — not partisan slivers. I get too much of that from the mindless media …

    1. Right, for republicans Bush was never president of the US, unemployment under Bush never rose from 5% to 7.8% in one year and continued rising, Bush never had one budget deficit during his presidency, Bush never started wars that weren’t paid for. It was all President Obama.

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