Chinese Manufacturers Lose Their Cool Over Apple’s Massive Sapphire Substrate Investment

GT Advanced Technology (GTAT) announced that it has entered into a multi-year supply agreement with Apple Inc. to provide sapphire substrate materials for US $578 million (NT $17 billion). Feeling the effect, Chinese sapphire substrate listed companies yesterday start preparing to make a move. Eight related concept stocks at Shanghai and Shenzhen stock exchange aside from Crystal Optech stocks which is unlisted, all others increased. 

Having first introduced sapphire substrate into the new iPhone 5 camera-lens cover, Apple has been keen on increasing the amount of sapphire substrate used in new products. Apple’s investment in GTAT is a prepayment of US $578 million. The company hopes through GTAT to accelerate development of its next generation products, use large capacity ASF furnaces to produce high volumes of sapphire material at lower costs. 

Analysts have remarked that Apple is a pioneer in the electronics industry and that the company’s innovative products will receive widespread market recognition far into the future. Apple’s 5 year nearly US $600 million agreement with GTAT shows the company’s confidence in the future sapphire substrate application field. Apple’s fingerprint recognition technology application not only will generate new demands in the industry, it will also spur other smartphone manufacturers to develop their own supply chains system. Listed Chinese companies will have a chance to enter these supply chains and benefit greatly. 

In regards to market quotations, among the 7 tradable sapphire substrate concept stocks posted yesterday, ECEC and Tanlong have both bottomed out. Aside from these two, CMC(4.85%), Jingsheng (4.52%), Tiantong(4.31%), San’an Optoelectronics(0.20%), and AT&M(0.13%)experienced different levels of increase. 

For investment inflow, six of the above mentioned stocks experienced large single investment inflows, including ECEC (RMB 30.69 million), CMC (RMB 9.43 million), Tiantong (RMB 5.53  million), Jingsheng (RMB 5.27 million), Tanlong (RMB 4.07 million), and San’an Optoelectronics (RMB 1.16 million). 

Everbright Securities remarked Apple is opening up new development for sapphire substrate in consumer electronics. The sapphire substrate used in the camera lens cover of every smartphone is 7.6 times of the LED usage volume for notebook computers. In the iPhone 5 fingerprint sensor, sapphire substrate used in home button for every smartphone is higher than in 20 times of LED usage volume for notebook computers. Also, chip level package production capacity for every fingerprint sensor costs as much as 4 units of 2M CMOS sensors. 

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