GT Advanced Technologies Inc (NASDAQOTH:GTATQ) stock has been on a tear since announcing an agreement to supply Apple (NASDAQ:AAPL) with sapphire for upcoming products (presumably as soon as the iPhone 6). Apple's choice to go with GT Advanced Technologies not only gave the company a secure source of revenue, it validated what management has been saying about sapphire being a viable cover screen material, opening up a huge market for the company.
Sapphire and all of the upside that goes with it is important for GT Advanced Technologies, but it's not the only market GT Advanced Technologies is targeting. There's also huge upside in solar, where the company got its start. If all goes well, this will create a more diverse revenue stream than relying on Apple long-term.
Solar is GTAT's past and a big part of its future
For years, GT Advanced Technologies has been a solar company. It was a key supplier to some of the world's biggest solar manufacturers, benefiting from the buildout in polysilicon and PV supply that flooded the market. But the good times ended when the buildout phase came to a halt because of an oversupply of solar panels and GT Advanced Technologies saw revenue and profits plunge as a result.
Over the past year, the solar industry has roared back as costs have fallen and the industry reached grid parity around the world and now installers are demanding higher efficiency panels. To bump up efficiency and meet demand, companies will be upgrading equipment, and that's where GT Advanced Technologies thrives.
The company's HiCz product has been in the pipeline for years but it just received its first major order from Qatar Solar Energy, which has opened a 300 megawatt facility and plans to expand to 2.5 gigawatts. If the technology performs as well as advertised, allowing efficiencies of over 23% on a cell level, I'd expect demand for HiCz furnaces to pick up this year and be booming in 2015.
Merlin Advanced Metallization Technology also provides interesting upside, reducing the need for silver paste that is often a large part of a module's cost. This is an integration further up the value chain and integrates the company deeper into customers supply chains.
Another technology that has a chance to lower costs and increase performance in solar as well as other industries is the Hyperion Ion Implanter, which allows manufacturers to create small and precise slices of sapphire or silicon. Companies are demanding thinner and thinner slices of sapphire and silicon and this technology allows them to precisely create these thin products. Management predicts that 200-250 implanters could be sold each year by 2018 and at $4 million-$15 million they would be a huge revenue source.
These new technologies are on top of already successful products like polysilicon reactors and PV ingot growth systems in the DSS line of products.
As the solar market reaches its next phase of growth and better technology is demanded, GT Advanced Technologies should see a new growth market emerge. The lull of demand that came from oversupply in the industry appears to be over and that's great news for companies like GT Advanced Technologies who are always pushing technology further.
Foolish bottom line
While Apple has given GT Advanced Technologies headlines and credibility in the sapphire market, it's the solar industry where the company's past is and where it has a lot of growth potential. Look for this technology to drive demand in late 2014 and into 2015 as the industry recovers.