Apple sapphire supplier’s projected 2H14 revenues likely indicate fall iPhone launch

Apple’s new sapphire crystal component producer GT-Advanced announced its Q4 2013 earnings results yesterday, and in addition to talking about the past quarter, the company shared some details about its future and its well-publicized partnership with Apple.

We previously indicated, based on research into publicly available shipping documents, that we expect Apple and GT-Advanced to be developing sapphire crystal displays for a future iPhone model. The companies are likely to be able to produce over 100 million displays this year…

Less clear, however, is when Apple will actually ship the next iPhone model to consumers. Ever since Apple switched from June/July iPhone launches to September/October debuts, there has been speculation that Apple could move back to early summer iPhone introductions.

Leaning toward Apple retaining its fall iPhone launch schedule is GT-Advanced indicating that it will “return to profitability” in the second half of 2014:

“Our results for the December quarter were in line with our guidance and the anticipated growth trajectory of our business remains unchanged,” said Tom Gutierrez, president and chief executive officer. “We expect to return to profitability during the second half of 2014.”

GT-Advanced also says that revenue and profitability will be back end loaded, which means that the company is expecting most of its positive financial performance to occur in the later part of the year.

The company expects that 2014 will be a transformational year, one in which it builds a sapphire materials business while continuing to invest in the new technologies that will drive its equipment business in 2015 and beyond.

The company expects that revenue and profitability will be back end loaded, with its sapphire materials business ramping as the year progresses, and with improving financial performance during the second half of 2014.

With Apple being GT-Advanced’s most significant partner, it seems likely that GT-Advanced projections point to the sapphire-covered Apple product (which most indications point to being an iPhone) arriving in the later part of the year. The last couple of iPhone launches occurred in mid-September, so perhaps Apple is aiming for a similar timeline for 2014.

Machines used to test/process sapphire crystal

As for the actual facility to Mesa, Arizona, we reported earlier this year that Apple has been “aggressively” pushing for an opening in February 2014. Based on comments from GT-Advanced yesterday, it seems like that plan is on target:

“Our arrangement to supply sapphire materials to Apple is progressing well and we started to build out the facility in Arizona and staff the operation during the quarter,” said Gutierrez. “We are pleased to have Apple as a sapphire customer and to be in a position to leverage our proprietary know-how to enable the supply of this versatile material. While our primary focus during the balance of the year is to continue to execute on our commitments in Arizona, our aim is to position GT not only as an exceptional sapphire supplier to Apple but also as an unparalleled world-class supplier of sapphire material and equipment to a variety of customers.

While Apple’s sapphire needs are obviously not GT-Advanced’s sole source of revenue, GT does indicate that it is only expecting “meaningful” revenue due to non-sapphire-crystal partnerships and products into 2015:

“Although we have significant opportunities in sapphire, the GT story is not only about our emerging sapphire materials business. In fact, our entry into sapphire materials may enable us to expand into other materials segments once we have fully ramped the operation in Arizona. The many diversification and investment seeds we have planted over the last several years in the LED, power electronics, advanced solar and industrial markets are expected to begin to bear fruit over the next 18 months. We are seeing significant interest in our new products and now expect equipment orders from these initiatives to be received during the latter part of 2014, with meaningful revenue recognition beginning in early 2015.”

This serves as further evidence that the second half 2014 profits is related to the Apple sapphire crystal partnership.

Sapphire crystal would strengthen the iPhone’s display quality

The next version of the iPhone is expected to gain a larger display, a curved bezel, improved processor, and include a health/fitness-centric version of iOS.