Digitimes Research: GTAT woes disrupt sapphire industry

Jessie Lin, DIGITIMES Research, Taipei 0

GT Advanced Technologies' (GTAT) move to seek bankruptcy protection on October 6 came as a surprise to the IT industry especially because the maker was a major supplier of Apple for sapphire screens.

The related supply chain in general, Digitimes Research believes, will feel the impact, such as seeing tight supplies of LED-use sapphire ingots and smartphone vendors reconsidering plans to adopt sapphire for their devices' screens.

There had been already many signs showing that GATA had been in trouble before it filed for Chapter 11 protection: The mass production schedule of the company's sapphire had seen a long delay until August 2014; its sapphire yield rate was only 30%; the company's sapphire production ramp up costs in 2014 were expected to reach as high as US$100 million; Apple's prepayments for orders had been delayed; and the company had reduced its capex and revenue target for 2014.

In August 2014, Digitimes Research estimated that GTAT would only be able to supply 1.35-2.25 million 5.5-inch sapphire screens in 2014, far lower than what Apple would have required.

Although GTAT is hoping to be able to maintain its operation after filing bankruptcy protection, Digitimes Research believes the chance that Apple will adopt its sapphire for products is slim, because GTAT's sapphire production yield rates remain low.

As a result, Apple is expected to turn to other sapphire suppliers for components used in cameras, home bottons, and Apple Watch's protective covers. Apple's orders are expected to impact these suppliers' capacities assigned for LED-related applications.

On the other hand, some other smartphone vendors originally planned to follow Apple's step to adopt sapphire screens for their devices, but GTAT's difficulties are likely to deter them from doing so now.

As makers in China have turned aggressive about expanding their sapphire capacities since early 2014 with the major application being smartphone-use sapphire screens, how these sapphire makers are going to find downstream partners that will use their products could become another issue. At the same time, existing first-tier sapphire makers' expansion plans for smartphone-use sapphire screen capacities may need to be postponed.