GT Advanced (boule, Pocketnow 001).jpg

As officially confirmed earlier this week, Apple has teamed up with smartphone cover glass maker GT Advanced in a $578 million multi-year deal which gives the iPhone maker steady supply of sapphire glass, a crystalline form of aluminum oxide hailed for its unmatched scratch resistance and hardness second only to diamond.

GT will be investing big money in large capacity furnaces to forge the precious gemstone on an industrial scale at Apple’s upcoming eco-friendly, 700-employee facility in Mesa, Arizona. Although the deal is subject to “certain exclusivity terms” and GT expects “substantially lower” gross margins, it’s of strategic nature and will be cash positive to GT.

By some estimates, GT’s revenue next year could experience an unheard-of 15x increase based on the Apple contract alone…

If anything, the partnership gives GT a new recurring revenue during the duration of the agreement.

John Paczkowski, writing for AllThingsD:

GT’s sapphire business accounted for 11 percent of its year-to-date sales — about $28.9 million in revenue. But, in forecasting 2014 revenue, the company said it expects to make $600 million to $800 million, with 80 percent of those sales attributable to its sapphire business.

GT first mentioned this forecast during a Monday earnings call.

In other words, following the signing of this new deal with Apple, GT’s sapphire segment will not only become the company’s main source of revenue, it will also drive a stratospheric spike in it.

2014 sapphire-related revenue at GT is expected to hit $480 million at the low end, and $640 million at the high end. That’s a 15x to 16x increase.

Of course, not all of that revenue jump should be attributed to Apple.

GT’s sapphire-making biz also includes ASF equipment business plus LED, industrial and specialty-materials business. They also have other clients, too.

On the other hand, the Apple contract is subject to “certain exclusivity terms,” as GT’s press release put it.

The release reads:

GT has accelerated the development of its next generation, large capacity ASF furnaces to deliver low cost, high volume manufacturing of sapphire material.

These R&D efforts will support its non-LED initiative with its new customer and are expected to enable the expansion of GT’s LED, industrial and specialty sapphire businesses by positioning GT and its equipment customers as the industry’s lowest cost sapphire producers.

Check out GT’s sapphire glass manufacturing process and its furnaces in a video below.

Apple has been using small pieces of sapphire as a form of camera lens protection since the iPhone 5. And with the iPhone 5s introduction, the company is using the sapphire crystal layer to protect the sophisticated Touch ID sensor.

There are too many unknown variables here. But given the suddenness of the deal, as well as its multi-year nature and exclusivity terms, Apple at the very least is looking to lock supplies of the sapphire cover glass for the next few years.

AllThingsD agrees as much, claiming that “Apple is rumored to be looking at sapphire as a replacement for Corning’s Gorilla Glass in its next-generation touchscreens”.

iPhone 5s first look

The million dollar question is: does Apple really need huge quantitates of sapphire to ditch Gorilla Glass on the iPhone or is it perhaps anticipating a new category product release in 2014 which may need a stronger screen protection, like the rumored iWatch?

What say you?

  • Jem Roxas

    What the hell is the first picture in this post about? :))

    • Jonathan

      That’s… a block of Sapphire..

    • jack

      you’ll understand if you watch the video…….

  • Jem Roxas

    Awesome! Can’t wait for the iWatch. Haha. Anyway, out of topic, is the Pebble smartwatch worth the money?

  • Yujin

    Now that Samsung has a stake in Corning, apple will probably get ready to offer something better….since we don’t know what samsung will force Corning to do.

    • Rowan09

      Corning will never stop making glass for other companies unless Samsung bought them out. I believe the deal gives them first dibs but not an exclusive contract on all Corning glasses.

  • Stefano

    Oh man I can’t wait

  • Yunsar

    What? So youtube comments and disqus comments changed?

  • SteveKalkofen

    Wow, biased much? “2.5 times stronger than Gorilla Glass”… that’s subjectively misusing the word “stronger” and is a complete lie to push one property: scratch resistance.
    The sapphire is more scratch resistant, but it’s more fragile than Gorilla Glass when it comes to impacts and subject to cracking. The fact is a Gorilla Glass is way less likely to crack than a sapphire screen.
    What good is a more scratch resistant screen if it’s cracked????