Apple Watch Adds Uncertainty in Sapphire Industry

Developments in the sapphire industry might become more unpredictable with the launch of the sapphire display glass equipped Apple Watch, said a Yole sapphire specialist at a sapphire and patterned sapphire substrate (PSS) forum during second day of the Taiwan International Lighting Show 2015 (TILS 2015), which runs from March 25-28 at TWTC Nangang Exhibition Hall, Taipei, Taiwan.

In a scenario where the Apple Watch is successful, but sapphire cover glass remains absent in iPhones, about 18 million TIE of sapphire can be absorbed by smartwatch demands by 2016, projected Eric Virey, Senior Market and Technology Analyst, LED Devices and Materials, Yole.

But if the smartwatch flops and the next iPhone is still sapphire-free, the industry might be spending four to five years absorbing excessive sapphire supply. “We expect many companies would disappear,” said Virey.

In an optimistic forecast, sapphire glass screens would be used in limited iPhones models by the end of 2015, followed by scaled up production.The Cupertino company might test the waters of the application in high end smartphones, and introduce it later on a mass level, since it can add product value, said Virey. An estimated 18% of smartphones would be using sapphire under this scenario. In this course of events, other OEMs would follow Apple's lead in growing sapphire, which would result in higher sapphire production capacity demands.

If Apple succeeds in materializing sapphire in iPhone displays, the sapphire industry would be seeing “2X-10X growth in the next few years”, he added.

Apple, alone accounts for a third of sapphire consumption, and continues to be a major driving force in the sapphire industry.

Is Apple working on future sapphire iPhone displays?

Since Apple’s failed attempt to introduce mass produce sapphire phone screens for the iPhone 6, it has remained unclear whether the company plans to use it in next generation phone displays. Apple has continued sapphire tests, and has 12 sapphire patents, but its smartphone sapphire display glass roadmap remains unclear, said Viery. Even if Apple is still interested in making sapphire glass equipped smartphones, it will probably consider only four to five large sapphire makers with high production capacity to make sapphire glass for about 9 million iPhones, analyzed Virey.

Foxconn ruled out as GTAT sapphire furnace buyer

Speaking about the missing sapphire glass panels on the iPhone 6 that GT Advanced Technology and Apple had been working on in 2014, the technology to enable it might not have been there, and “the time frame was too aggressive,” said Virey. GTAT, Apple’s former exclusive sapphire supplier, was delivering sapphire yield rates “10 times lower than its target” . Moreover, GTAT was spending US $11 to manufacture sapphire, about double of its price target, he added.

After GTAT filed for bankruptcy protection in October 2014,there has been a lot of market speculation about the next Apple's sapphire supplier. Yet, there has been no sign of Apple in talks with any sapphire maker during first quarter of 2015, said Virey.

Foxconn has also been ruled out as a buyer of GTAT's 2,000 sapphire furnaces and replicating the sapphire manufacturer's supply model with Apple. According to Virey, there has been few sapphire furnace procurements in the industry. Due to the low equipment demands, there are probably no potential buyers in sight, he added.

“Now everybody has seen what has happened, they have learned their lesson,” said Viery. “We don’t think anyone will invest massively in such high model capacity for just one customer, and still with a lot of technological uncertainties.”

O­ne hard learned lesson for the sapphire industry.

(Author: Judy Lin, Chief Editor, LEDinside)

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