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GirlsUnder30 (97.63)

It's kinda Corning to discuss GTAT sapphire

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January 03, 2014 – Comments (7) | RELATED TICKERS: AAPL , GLW , MSFT

Gorilla Glass is amazing stuff! It’s strong, flexible and optically accurate so why use sapphire? Looking at it superficially…ahem… there really isn’t any reason to. At best, the hardness of sapphire comes at the expense of brittleness so even though you get less scratches, you get more cracks. No, the reason Apple decided to try sapphire was because it believes it can fuse the sapphire to a less expensive substrate where it will retain the hardness as a micro thin layer on that substrate. This is definitely an experiment that can go horribly wrong for both Apple and GTAT and should that happen, Corning will smile and tell Apple I told you so but let’s say Apple is successful and the new glass works like they planned. The entire Apple line will then feature this ‘Apple Glass’. Will this result in oven sales like crazy for GTAT? Nope. Apple will guard this technology like a favored child and will go to war with anyone who even tries to produce anything similar so you can count out all the other mobile and television producers from GTATs potential user base unless those manufacturers are willing to pay onerous licensing fees. We can safely assume that they won’t. This will be the cementing of the AAPL/GTAT relationship and GTAT will only grow in price as much as Apple will let them. This should be great news for Corning, it loses Apple but it gains all the other producers, right? Not so fast. Microsoft is looking at other nano-materials to fuse onto substrates and the other mobile producers will be under greater pricing pressure to compete in the market which in turn will hurt the pricing of gorilla glass. Hmmm, so who is the big winner? If Apple can make this new glass work, they once again get the lion’s share, if they don’t Google, Amazon and Microsoft will fight it out for the new king of consumer mobile products. Corning will do okay for as long as gorilla glass is not ‘outglassed’ by a competing product but considering all the nanotech materials research being done, this is not likely. The big loser in all this is GTAT. They sold their sapphire future to Apple for a measly 500 million dollars and if the Apple glass product fails, it may very well be their end as an independent company.

7 Comments – Post Your Own

#1) On January 03, 2014 at 10:45 AM, Mega (99.95) wrote:

The sapphire deal was another confirmation of the iWatch coming soon. It will go on that, probably not on iPhones for at least a few years, since the price for larger pieces is excessive compared to glass.

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#2) On January 03, 2014 at 12:14 PM, stockspud (44.68) wrote:

Yes, I agree with the iWatch having GTAT sapphire but it sounds the author is saying all the future Apple products will have Sapphire as a micro layer. This implies a few things to me:

1. the cost will be less than 100% sapphire

2. it's a new kind of glass where not much sapphire will be used

3. and GTAT will be AAPL's bitch from now on

If the author is right, GTAT will not be more than an AAPL employee who will be dismissed if the new fused glass fails or bought out before it has a chance to grow on its own if the product is a great success. The risk/reward at this price seems way too high

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#3) On January 04, 2014 at 2:34 PM, Stockllama10 (66.34) wrote:

Basically, we have

 

Scenario One: Sapphire Watch face successful, Apple grabs exclusive rights, GTAT becomes Apple employee, Corning loses business

 Scenario Two: Saphhire Watch Face fails epicly, Apple switches to Corning, Corning stays with Apple, GTAT fails.

 

Sounds great for GTAT, doesn't it? 

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#4) On January 04, 2014 at 3:07 PM, Mega (99.95) wrote:

The sapphire watch face will most likely be successful. But that doesn't mean your Scenario 1 is realistic.

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#5) On January 04, 2014 at 3:46 PM, GirlsUnder30 (97.63) wrote:

Mega

Having a history of Apple business dealings as a reference, what do you believe makes 'Scenario One' described by Stockllama unrealistic?

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#6) On January 13, 2014 at 12:36 PM, TMFVelvetHammer (68.93) wrote:

My question about these binary scenarios above is it pretends that GTAT will have no other companies attempting to use Sapphire if/when Apple is successful at doing what you claim is their goal above.

There just isn't much logic to that as I see it. You said yourself that lots of companies are working on these nanomaterials. The fact that there are at least 3 products in the Gorilla Glass segment alone is evidence that more companies than just Apple could use GTAT.

 

Sure -- not in the same manner as Apple if it develops a proprietary process or product that becomes protected IP, but you're reaching too far with your assumptions here.

 I think your potential valuation argument made right after the deal was announced has more potential validity -- though the market is rarely rational when it sees potential for the future. 

 Thanks for sharing your thoughts on GTAT.

 

-jh 

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#7) On January 14, 2014 at 8:34 AM, GirlsUnder30 (97.63) wrote:

elihpaudio
Thanks for your contribution. The scenarios painted above are abbreviated but still valid. Pure sapphire will not be competitive for a digital display cover and the other markets for it will not develop quickly. In the time it takes to develop, other products will surface to compete. GTAT can sell sapphire ovens today but have they?

The attempt at the microfused sapphire on cheap substrate (Apple Glass) must succeed for GTAT or losses amounting to 60 percent of its current capitalization will ensue so what happens to the Apple prepayment in that scenario? Apple is working very intimately with GTAT on this process and will control, if not outright own, the end product so what scenario do you see unfolding for GTAT sapphire?

The relationship with GTAT will make Apple privy to all the developments at GTAT before the market can fairly assess them and when you add in the institutional interests desire for a quick sale, you see a tremendous potential for an Apple purchase of GTAT before any growth story happens but since so much of GTAT's profit potential is dependent on Apple and with Apple participating in GTAT product development, Apple will ultimately dictate the price of GTAT. The instutions holding can get out at $9 and still make a great return so there is a very good chance people buying at this price will gain nothing. If the fused glass doesn't happen, what do you think will happen to GTAT?

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