Is Apple Inc. Risking Too Much With Sapphire Crystal?

Corning (NYSE: GLW  ) , which supplies its Gorilla Glass for Apple's iPhones, is still trying to wrap its mind around why Apple (NASDAQ: AAPL  ) will be using sapphire crystal in some of its future products. While the glass may be more scratch resistant, it has a number of disadvantages to Gorilla Glass -- problems Corning is happy to elaborate on. Corning's criticism prompts an important question: Is Apple risking too much by shifting some of its display production to sapphire crystal?

Apple already uses sapphire glass to protect the camera in its iPhones and on the home button of the iPhone 5s for Touch ID.

Sapphire versus Gorilla Glass
Apple CEO Tim Cook recently confirmed, at Apple's annual shareholders meeting, that the sapphire glass will be used in a "secret project" the company is working on. The new sapphire Arizona plant, operated by GT Advanced Technologies (NASDAQOTH: GTATQ  ) , will be used for both "extensions of what we're already doing" and for "things you can't see," Cook said.

This week, Corning senior vice president Tony Tripeny listed a number of problems he sees with sapphire during a question-and-answer session at Morgan Stanley's Technology, Media & Telecom Conference.

  • Sapphire is about 10 times more expensive.
  • It's about 1.6 times heavier.
  • It's not environmentally friendly.
  • It takes about 100 times more energy to generate Sapphire than Gorilla Glass.
  • It transmits less light, which leads to dimmer devices or shorter battery life.
  • It breaks under less pressure than Gorilla Glass.

While Corning acknowledges that sapphire is scratch resistant, Tripeny was clear that the problems outweigh the benefits.

"So when we look at it, we think from an overall industry and trend that is not attractive in consumer electronics," Tripeny said. 

Further, Tripeny expanded on sapphire crystal's poor operational and manufacturing potential:

The formation takes about 4,000 times longer than Gorilla Glass at a significantly higher melting temperature. Its hardness makes machining more difficult and costly. Then the cost per unit increases exponentially because when you have defects in boundaries in the crystal growth process, you essentially cut them out. And so unlike glass, where we have developed technologies so that we can have [a] very large pristine pieces of glass, when you have that on crystals, what you end up doing is always having a yield issue. So it is really those items that make things more expensive.

Despite Corning's criticism, Apple is bent on using sapphire in future products. Based on GT Advanced's purchases of 518 sapphire furnaces and chamber systems and another 420 machines on order, analyst and sapphire expert Matt Margolis predicts the Arizona plant could produce around 100 to 200 million five-inch sapphire displays per year.

A changing competitive landscape
As one of Corning's biggest customers, a shift toward sapphire glass could have major competitive implications on the entire display industry. Producing sapphire displays at a large enough volume to serve Apple may spur new cost savings and innovation in sapphire that make it a viable alternative for other manufacturers besides Apple.

In one example of possible innovation that could lead to a shift toward sapphire displays, as 9to5Mac author Ben Lovejoy pointed out, GT Advanced recently "acquired a solar panel company that developed a new technique for slicing hard materials very thinly using an ion particle accelerator. ... If the same technique can be applied to sapphire, and if it could be combined with a sapphire laminating system already patented by Apple, the cost could plummet."

But even if Apple's arrangement with GT Advanced leads to sapphire scale and innovation, will the advancements be enough to overcome Tripeny's exhaustive list of disadvantages to sapphire crystal?

With the limited knowledge we have on the matter, Apple's bet on sapphire crystal appears huge and risky. With so many advantages to Gorilla Glass, investors shouldn't speculate on any outcomes in this glass war and, instead, wait to see how things play out before altering any investment thesis for stocks meaningfully related to this changing competitive landscape.

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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 05, 2014, at 7:54 PM, melegross wrote:

    Do you always believe what a company about to lose one of its biggest clients, says about what is supplanting them? I don't.

    Do you really think that Apple would out $578 million on the line for something they haven't investigated deeply? I don't believe that either.

    In fact, a number of their assertions are wrong, or are irrelevant.

    10 times more expensive. Yes, currently, that's true. But GTAT is the most advanced sapphire producer around. The new very large sapphire furnaces (1,000 of them!) used in this facility will produce much larger boules of sapphire than ever before. And just like the chip industry when going from smaller diameter boules of silicon to much larger ones, this will bring the cost way down. It will still be expensive, but estimates are that it will be 3 times, not 10. Apparently Apple thinks whatever this cost is, it's low enough for them.

    1.6 times heavier. Those covers are very thin. The difference in weight is negligible, perhaps a few grams. Apple's phone is very light. The difference in weight won't be noticed.

    It uses more power to make than Gorilla glass. But Apple's plant will be using renewable energy. How much renewable energy does Corning use producing Gorilla Glass?

    100 times more energy. This goes back to two other issues already mentioned. The much larger boules are much more efficiently produced, and Apple is using renewable energy. The difference won't be anywhere near 100 times.

    It is slightly less efficient in light transmission. But we're just talking about a few percent. At the thin slices we,re talking about, there is so little light absorbed, that it makes no difference.

    Breaks more easily under pressure. That's very questionable. Sapphire is much stronger than Gorilla Glass. I've seen it described as three times as strong. Corning is using tests they have devised to maximize the apparent strength of their product vs this. Remember that Gorilla Glass does break pretty easily, despite its strength under pressure. Sapphire js much more resistant to breakage when a corner is hit than is Gorilla Glass, which is the most common cause of breakage.

    One has to expect Corning to be nervous over this highly publicized plant. Apple began Corning's Gorilla Glass business, and if other manufacturers can eventually get access to sapphire, Apple will have ended it. I understand that they are nervous.

    But this article is improper. It should be asking if Corning is telling the truth. And the headline should be "How worried is Corning over the possible loss of their Gorilla Glass business since Apple has found a better substitute?"

    That would better reflect the situation, than the attempt to attract to collect clicks with the current headline.

  • Report this Comment On March 05, 2014, at 8:07 PM, spyfly2 wrote:

    Thanks Melegross. Well said.

  • Report this Comment On March 06, 2014, at 2:00 PM, mongoose73 wrote:

    I read an article about the new slicing technology. It should allow layers about 10 times thinner than current. This new thickness is 20 microns instead of 200. Apple is quoted as having new laminating technology.

    Suppose that everyone is right about sapphire and Gorilla glass 2 or 3. Suppose that Apple will be laminating a thin, scratch resistant sapphire film over Gorilla glass for most iPhones. You get great strength with impressive scratch resistance and you spread the cost over ten times as many phones.

    On the other hand, the Rich Folks could very well pony up for a full sapphire Iphone to go with their iWatches covered with Sapphire crystal.

    Being long GTAT AND Corning would be good. Who knows. Bying GTAT at under $3 last year was a good risk. Many options out there are cheaper. GTAT has technology for solar cells that substantially increases efficiency. A second reason for owing GTAT. Maybe Corning should buy GTAT.

  • Report this Comment On March 20, 2014, at 5:16 AM, Intrepid11 wrote:

    Mel, you've got some obvious errors:

    1. My sources indicate that the larger boules produced by the new furnaces will cut the cost not to a third but by 20-30%, i.e. to 70-80% of present cost.

    2. the energy difference is huge, no matter its source. That relates to cost. Obviously Apple believes it will still be able to sell some Apple products at premium prices. But that will not translate into the entire phone market going sapphire, not by a very long shot.

    3. Sapphire is not stronger than gorilla glass, it is harder, i.e. it is more immune to scratching. It will fracture much sooner than gorilla glass. Please identify who told you the contrary. He is wrong.

    4. more resistant when a corner is hit? ha!ha! how often is the corner of a cell phone cover struck at its corner? somewhere around never, since the corners are recessed.

    Nice fishing expedition.

  • Report this Comment On July 12, 2014, at 7:57 PM, rav55 wrote:

    Sapphire or Alumina glass has benefits that outweigh the small losses in the transmission spectrum of the glass.

    Quartz and Borosilicate glasses are very soft and they easily scratch and break due to shock. Most folks are aware of these flaws in the iPhone. In fact these flaws have prompted an entire iPhone glass replacement industry.

    Sapphire or technically Alumina or Al2O3 is much harder at 9 on the mohs scale. Alumina or saphhire or corundum os the 2nd hardest material known to science after Diamond.

    Quartz and Borosilicate glass is down around 5.5-6 on the Mohs scale.

    However the trasnmission spectrum can be improved with the application of an anitrlective coating on the backside of the glass. This would increease the trasnmission of the image by 5% or so and greatly improve the clarity of the image. This would not be a very expensive addition to the product.

    All in all the use of Alumina glass for the iPhone is a tremendous improvement. Anyone who has a currently scratched or broken iPhone will attest to that. It will be essentially scratch proof. I have a Citizen Eco drive drivers watch that I bought 4 years ago and wear daily. It has a Sapphire or alumina crystal and there is not a single scratch on it. It is virtually flawless.

    As far as the additional weight goes, sapphire density is about .7 grams per cubic centimenter more than quartz. That would increase the weight bu maybe 1.5 grams. Hardly even worth discussion.

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