Apple strikes sapphire furnace/supply deal with GT Advanced

|About: GT Advanced Technologies, Inc. (GTATQ)|By:, SA News Editor

The deal, announced within GT Advanced's (GTAT) Q3 report, calls on GT to supply Apple (AAPL) with sapphire via furnaces the former company will own/operate at an Arizona facility owned by the latter.

GT plans to employ 700+ people at the facility, and Apple will be providing GT with a $578M prepayment to assist with the efforts. GT will reimburse Apple for the prepayment over five years, starting in 2015.

The magnitude of the initiative suggests Apple plans to use sapphire cover glass to protect the displays used in future iOS hardware (perhaps including 2014 iPhones/iPads). Rumors about such a move have been around for a while, heightened by Apple's use of sapphire to protect iPhone camera lenses and the iPhone 5S' home button.

Assuming Apple uses GT's sapphire with iOS hardware displays, the deal is a negative for Gorilla Glass supplier Corning (GLW), particularly since it could encourage other mobile OEMs to embrace sapphire and improve its economies of scale. Sapphire is thinner, stronger, and more scratch-resistant than current cover glass solutions such as Gorilla Glass, but is also much costlier.

On account of the Apple deal, GT has "accelerated the development of its next generation, large capacity ASF furnaces." The company expects these efforts to aid its efforts to offer next-gen furnaces to traditional customers in other market segments (LEDs, industrial manufacturing, etc.).

Update: Arizona's governor's office announces Apple will be building a new facility in Mesa, AZ. 1.3K construction jobs will be created to go with GT's 700+ manufacturing jobs. Corning is now down 1.2% AH.