GTAT Arizona Plant Low Yields Suggests Limited Sapphire Cover Usage in iPhone 6

GT Advanced Technology (GTAT) low sapphire yield rates seem to have confirmed earlier rumors that the iPhone 6 sapphire cover version will come in limited volumes, according to numerous reports.

Mark Heller of CLSA attributed GTAT/Apple’s low iPhone 6 sapphire cover yields to the use of cheap alumina supply from a Chinese supplier, according to a Barrons report. GTAT is currently looking for better quality alumina to make sapphire boules.

Another factor contributing to the low sapphire yields is immature process yields, which Heller observed one supplier was generating better yields than the other supplier.

The analyst also noted the 2,000 sapphire furnaces at the Arizona plant were utilized for iPhone 6 sapphire cover glass, and not for iWatch as previous market speculations noted. Heller suggested iWatch sapphire demands might be outsourced to an Asian manufacturer.

Despite the low sapphire yield rates, sapphire slicing manufacturers Biel and Lens Tech have started to cut sapphire for 4.7-inch and 5.5-inch iPhones. An indication that while sapphire covers will be applied to the new phone, it will be done in limited volumes.

"We do not believe that the initial launch of the iPhone 6 will have a sapphire display in any material volumes, in either 4.7” or a 5.5” form factor,” a Street Insider report quoted Canaccord Genuity Analyst Jonathan Dorsheimer saying on July 7, 2014.

Heller is the latest analyst to join others from UBS and Canaccord Genuity in downgrading GTAT performances because of the lower than expected sapphire yield.

The analyst cut his 2014 revenue outlook by 30 percent to US $500 million, and lowered EPS estimate from profit of 10 cents to a 30-cent net loss per share.

GTAT prices have dropped 23.7 percent from an all-time height of US$ 20 in early July to US$ 15.26 as of July 16, 2014 after the three financial institutes lowered their outlook for the sapphire manufacturer. On July 7, 2014, the company was downgraded from buy to hold by Canaccord Genuity, and by UBS from buy to neutral.

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