Sapphire won't be preventing shattered iPhones like this one... yet. Image source: Author.
When Apple (AAPL +1.15%) unveiled the iPhone 6 last Tuesday, many investors were shocked when it didn't include a sapphire display. After all, Apple did strike an exclusive deal last November with sapphire producer GT Advanced Technologies (NASDAQ: GTAT) to supply the extremely durable material, which is second in hardness only to diamond. That deal even included a series of four advance payments totaling $578 million to GTAT to help get its sapphire production facility up and running.
Last month, GTAT confirmed it was set to receive its final payment by the end of October -- as long as the ramping facility achieved "certain operational targets." But ever since Apple instead described the iPhone 6's "cover glass" as "an ion-strengthened thing of beauty" -- a likely indication it's still using Gorilla Glass from longtime partner Corning (GLW 0.96%) -- GT Advanced Technologies shares have plunged by more than 30%.
So what happened? The following two things.
Low production yields -- but not from GTAT
Back in April, I was first able to chat with analyst Matt Margolis after I voiced skepticism that GTAT would be able to ramp its production facility quickly enough to meet Apple's iPhone 6 demand. After all, GTAT plainly stated its agreement didn't guarantee production volumes, but rather, only required it to maintain a certain level of production capacity. And that, I argued, was a "testament to any unforeseen challenges GTAT might encounter as it works to expand production."
The iPhone 6's curved edges reportedly caused sapphire production difficulties. Credit: Apple,
But last Wednesday, Matt wrote Apple's plan as of "weeks ago" was to still unveil a sapphire-covered iPhone 6. Moreover, he says, the problem didn't sit with GTAT, which had shipped "large quantities of sapphire to the China finishers" during the last month. According to his supply chain sources, those finishers had significant trouble consistently achieving the curved edges required for the iPhone 6's gorgeous, seamless design, which meant yields for the sapphire cover were at "25% or less."
In this case, kudos would still be in order for GTAT for fulfilling its end of the deal. What's more, the sapphire that didn't meet Apple's requirements will apparently be converted to cover both the standard and "Edition" models of the Apple Watch, which Apple has confirmed will use sapphire, and debuts in early 2015.
Nonetheless, while GTAT isn't to blame, these unforeseen production challenges further down the chain have certainly slowed sapphire's broader-scale adoption.
Failing drop tests
But that's not the only problem Apple encountered with sapphire. As VentureBeat subsequently reported, an IDC analyst's channel checks revealed sapphire-covered iPhones "repeatedly cracked during standard drop tests conducted by Apple suppliers."
The same analyst says it's not clear exactly when these drop tests occurred. But it is worth noting that the report meshes with comments made by Corning executive Tony Tripeny back in March at Morgan Stanley's Technology, Media, and Telecom Conference. Specifically, Tripeny said that, while sapphire "is a scratch-resistant product, it still breaks. And our testing says that Gorilla Glass, about 2.5 times more pressure that it can take than sapphire can."
Corning isn't resting on its laurels, either. A little more than a month ago, Corning CFO Jim Flaws confirmed they're planning "to introduce a new, enhanced generation of [...] Gorilla Glass later this year."
That's not to say Apple isn't working hard to improve the strength of sapphire. In fact, earlier this month, the U.S. Patent and Trademark Office published an Apple patent for implanting ions on a sapphire display, much in the same way Corning already does with Gorilla Glass. If those methods prove effective in reducing the number of failed sapphire drop tests, a sapphire-covered iPhone could still be in the cards down the road.
