It appears that it's a revenue-timing issue, nothing more sinister. That's actually reassuring to me.
Thumbs down; way down!
In a press release issued by IHS on October 14th, IHS attributed the optimistic outlook on sapphire substrates to Apple:
“Apple triggered the current boom in demand when it became the first smartphone maker to employ a sapphire lens cover in 2012,” said Richard Son, senior LED analyst at IHS. “Other smartphone brands are now following suit, helping drive the growth of the sapphire ingot market for the next few years. Combined with strong sales from the fast-growing LED lighting market, the increase in demand should help alleviate the oversupply that has plagued the sapphire market in recent years.”
IHS went on to say:
"Apple first employed sapphire for the iSight camera lens cover in the iPhone 5 in September 2012. The company then expanded its application to the home button of the new iPhone 5s, introduced last month.
For its part, LG Electronics adopted sapphire for the camera lens cover of its Optimus G2 smartphone, introduced in September, 2013. Other handset makers, meanwhile, are expected to offer their own sapphire-equipped models in the near future.
Sapphire substrates are suitable for covering lenses, buttons and displays because they are transparent, yet more scratch-resistant than glass. Glass can become scratched from contact with hard objects, which can degrade the performance of a camera lens or a fingerprint recognition window."
Credit Suisse, which issued a research note on FIO yesterday, said it expects "revenue of $83.5mn (-29% y/y, -21% q/q) and ($0.10) in EPS vs. consensus of $84.7mn/(-$0.11)." Further, "while near-term revenues are impacted by strategic customers pausing spend and channel conflicts with OEMs, full year estimates are potentially conservative with two potential new major deployments."
CS reiterated its Outperform rating with a target of (only) $15.
Hope that your analysis is correct, but I haven't found regional "utilization" rates to be a reliable indicator of RBCN's prospects or results.
In part, the item states: "Apple has yet again swept the market with the launch of the new iPhone 5S and iPhone 5C. The new cell phones have acted as a propeller for sapphire substrate manufacturers and LED manufacturers with the introduction of new fingerprint recognition technology. This has significantly increased the demand in sapphire substrate. Whether or not price inflation for substrate ingot will be able to expand substrate manufacturing, or if it will affect LED chip manufacturing cost is the current focal point of the market. The new iPhone uses a duel-LED flash. "
That ML-BAC report was issued this am. I also have a less imposing report (only 7 pages, 2 or 3 of which - - as usual - - are legal disclaimers) that ML-BAC issued on 09-12-13. The title of the report is: "Tech Talk focused on hybrid flash and all flash arrays".
Check out today's DigiTimes for brief article on anticipated use of sapphire in Home buttons of Apple's 9.7 inch iPad and 7.9 inch iPad mini they say should be introduced in October.
Taiwan sapphire makers also reported to say that iPhone expected be introduced in 2014 may have sapphire screen cover.
Your interpretation of Dawson's Form 4 is flawed. The reported sale was made pursuant to an SEC Rule 10b5-1 plan. See SEC Rule 10b5-1, promulgated under the Securities Exchange Act of 1934.
" The newest addition to the Apple family, the iPhone 5S/5C will be launched later this month. The addition of fingerprint recognition technology incorporating sapphire crystal has greatly benefitted substrate manufacturers. Crystal Applied Technology hit record highs with their August revenue at NT$194 million (US$6.5 million) with a monthly growth of 26.79 percent. Crystalwise Technology revenue for August was NT$170 million, an increase of 3.6 percent."
"In the past, one 2 inch piece of sapphire crystal was enough to be cut into 55 pieces for use in Apple iPhone cameras. Now however, the same piece of crystal can only be cut into 16 pieces for the home button in the new iPhone 5S/5C. With increasing screen size and manufacturing becoming more difficult, there will be a much faster consumption of sapphire crystal manufacturer’s production capacity."
LEDinside, 09-11-13, LeahRae
The shorts appear to be fighting the trend. We're now off by $0.60 and the day's not half over.
BTW, CS raised GTAT's target price by $5 on the basis of increasing sapphire use in smartphones over the longer term.
"Growing sapphire use in consumer electronics: We estimate that the use of sapphire
in smart watches (~10m TIE sapphire wafers per year in 2015), the Apple button (~15m
TIE wafers), and smartphone camera covers (~25m) may contribute ~50m TIE to sapphire
wafer demand out of a total of 220m TIE without smartphone screen covers and 270m TIE
with 5% penetration of smartphone screen covers. The growing use of sapphire reveals
that Samsung, Apple and others value the scratch resistance of sapphire but have not
requested that suppliers ramp capacity for smartphone screen covers due to the cost
premium. Gorilla glass may cost about $3 per screen, about $10-15 less than sapphire.
Phone accessories protecting the screen are commonplace, making the need for scratchresistant
sapphire questionable. However, we do believe that if the development of
Hyperion successfully enables sapphire laminates of $3-5 per screen in 2015, adoption
would be much more likely than at the current cost premium of sapphire to Gorilla glass."
twr, you're doing yeoman's work by digging down to get to the bottom of the issue. Thank you.
I've seen articles within the past month (prior to yesterday's debut of the 5S), that provide various examples of sapphire usage in different devices. I don't recollect any converted the Home button into TIE.
If - - as indicated in your research and as I suspected - - the amount of sapphire that is used in one 5S Home button is meaningful in terms of the overall market (in other words, in the aggregate), then it should positively impact the demand side and put upward pressure on prices.
I do hope that one or more of the analysts who cover sapphire manufacturers will provide some information on the potential impact of Home button usage on sapphire inventory and prices.
Again, thanks for the information.
Yes! The Touch ID Home button is "laser-cut sapphire crystal".
If, as you indicate, the amount of sapphire used in each Home button is considerably larger than that used for the camera lens cover and for an LED, this could be a game changer for sapphire demand. Will you please provide the source of the information that you posted. Thanks.