Apple Inc. and China Mobile have officially signed the deal that will finally allow the Cupertino, Calif.-based Titan of Tech to sell iPhones to China Mobile’s 750 million smartphone customers. Apple's AAPL stock has run up about 15 percent since the launch of the iPhone 5S; now the stock is really ready to turn up.
China’s barring of the iPhone has always been a hurdle for Apple. Apple’s smartphone market has been largely saturated. Everybody who wanted an iPhone now has one, with the exception of China Mobile customers. The stocks of many Apple suppliers have peaked and receded because iPhone sales have plateaued. This has left limited growth potential for Apple stock and for its suppliers.
The only way for the stocks of Apple’s suppliers to appreciate is if the smartphone market itself grows, and now that is possible. Here’s a list of major Apple suppliers that will benefit from the China Mobile deal.
10. Corning Incorporated (NYSE:GLW): Corning makes Gorilla Glass, which comprises the iPhone screen. Be careful with this one; Apple has cozied up to GT Advanced (NASDAQ:GTAT), the maker of Sapphire Glass. Sapphire Glass is an ultra-durable glass that is used in the iPhone Touch ID button, as well as in the camera lens for the iPhone 5. Apple is rumored to be switching to Sapphire Glass altogether for its iPhone 6 display.
Apple was a free agent in any major sport or a home owner without a home that is in the market for a house. They could have selected anyone for their team, their house etc.
They only deal with the best and they chose gtat. They will never buy gtat, well maybe not never but their business model today is to be innovators and create ideas and products to bring to market. They want it to be simple and what people want. They also want to be the lowest cost producer for the highest quality stuff which means you need reliable suppliers. These are not my words but from a Steve Jobs interview from the mid 90s. What he focused on then has not changed. The Internet and how we communicate has but his basic premise and beliefs that are entrenched in apple are as strong and original as they have always been.
My point is this is not some shot in the deal swing and hope you hit one out of the park deal. Yes it does come with risks to meet apple demands and operate machinery vs just sell and install. The $578m is phase 1 cover deal for gtat and apple. I fully expect an additional deal between $500m and $1b to come right after the iPhone 6 sapphire phone comes out. In order for apple to cover 500m devices with sapphire (phone, tablets, iPods, I watches) they will need gtat to double down in the size of their furnace footprint and process to meet 2015 and 2016 demand.
The gift that keeps giving is apple and gtat. Blockbuster 2014 is coming to those who wait. Feel free to gobble up shares now before apple reveals their sapphire gems.
This one trick pony may account for 75% of their 2014 revenue but will grow at 50-75% a year until 2017 and all apple devices have converted over to sapphire.
On top of this will be the new products from apple iWatch, alarm clocks, hand held gaming devices, you name because they will go after xbox, sony.
Add led, solar, and emerging uses for low cost sapphire and u have a $20b company with gtat in 3-5 years.
I think its time to double down tomorrow to close out cyber week and by far the craziest week for gtat I've ever seen. Volume today was astronomical with no price movement? Who was unloading shares and buying back at the same time? Was this automatic sales / distributions from mutual funds?
So what's changed in a week? iPhone sapphire screen rumors keep emerging daily - no change since 11/5/13 day of deal
Apple signs deal with china mobile and opens up 750m new potential customers. One thing is for sure the % market share by apple in china mobile space will jump by multiples once they add sapphire screens. Why? Because these phones are very very expensive in china relative to average income. But if you can own a device for 4-5 years without fear of breaking the device it will allow millions more of china mobiles customers to add apples sapphire iphone to their plan.
Gtat raises $254 to $290m. Debt priced at 3%. I'm still upset they didn't max out the credit card on this deal. Additional 8.5m shares issued. Honestly so what? Eps guidance won't change and the cash raised gives them $750m after apples 1st installment on 1/15 with another $450m coming in 2014.
Gtat makes up 50% of world sapphire and Apple (biggest, most $, most followed, highest brand value in the world) picked them to bring their sapphire ASF sapphire product to the market as fast as money can buy. "Hey Tom" "Ya Tim?" "I brought my check book, I like what you have demoed and showed us with your sapphire process and technology and I understand you can drive costs down to replace gorilla glass on all my devices. How much $ will it take for you to bring sapphire laminates for over 150m devices in 6 months? TG over half a billion. Tim "how about $578m".
We know it didn't exactly like that but in simple terms it did. I fully expect the apple gtat marriage to be a great one. Other companies have great technology but they can't innovate. Gtat +apple = amazing innovation
It's about $1.50 to $2 eps for every 10 million phones sold assuming 35% margin. Somewhere in the ballpark
China Mobile Ltd. has signed a long-awaited deal with Apple Inc. to offer iPhones on its network, a person familiar with the situation said, an arrangement that would give the U.S. technology giant a big boost in the world's largest mobile market.
The rollout of iPhones on the world's largest mobile carrier by users, with over 700 million subscribers, is expected to start later this month, around the time of a Dec. 18 China Mobile (CHL) conference in Guangzhou, according to two people familiar with the carrier's plans. China Mobile is one of the world's last major carriers that doesn't offer the iPhone.
At the Dec. 18 event, China Mobile plans to unveil a brand for its fourth-generation, or 4G, network. China Mobile executives have said they would only begin to sell the iPhone after introducing 4G services. China's Ministry of Industry and Information Technology said Wednesday it gave licenses to China Mobile and its smaller rivals to operate the higher-speed mobile networks, clearing one of the last hurdles.
An Apple spokeswoman declined to comment.
A deal with China Mobile would give Apple (AAPL) access to a subscriber base that is seven times the size of Verizon Wireless, the U.S.'s largest carrier. Greater China, including Hong Kong and Taiwan, is Apple's third-biggest market after the U.S. and Europe in terms of revenue.
Who has even heard of this and why are they reacting since this is all about gtat. Is it the sapphire shortage and margin improvement for them ? Trickle down effect?
Shares of six sapphire producers and iPhone handset component suppliers, including TDG Holding and Zhejiang Crystal-Op Tech, also saw their shares jump by the 10-percent daily limit, amid reports claiming that Apple's iPhone 6 might be equipped with a sapphire glass screen display.
Everyone was up in arms about no minimum levels. What I gather is apple won't commit to a specific Gauranteed level and gtat will need to meet their forecast demands. To me apple won't go into the year saying 120m units when the market changes and they need 150m units by the time June comes. Love this deal !
In addition, we must supply sapphire material that meets agreed upon specifications by agreed upon deadlines and we must have available an adequate supply for expected, although not committed, demand. If we are unable to comply with each of these requirements, we will be subject to significant warranty claims and/or liquidated damages. We may be unable to make these liquidated damage payments or satisfy our warranty obligations and any such failure will have material adverse consequences for our business and results of operations.
ooks good. Of course, as always, there are no guarantees.
GTAT is pricing a “secondary” issue of stock this evening to be used in the main, according to the prospectus, for general corporate purposes. Meaning that there aren’t vulture capitalists hovering around ready to scarf up all the offer’s proceeds to pay themselves “special dividends” at new shareholders’ expense.
Likely to price at under $10 per share, stock purchased on this secondary—an offering of new shares of an existing publicly traded company as opposed to an IPO—could be a deal, even in a market that’s gotten decidedly toppy and negative of late.
We’ve put in for shares on this deal and should know tomorrow whether we got any—one usually does on secondaries, but not always.
If you’re not in on the deal (or if we ourselves don’t get in), next best step is to try to catch the stock under $10 per share. However, any prospective investor should look ahead and understand that Q1 2014 could be iffy for nearly all stocks if Obamacare proves to be even more of an economic disaster than it promises to be—a major reason why markets are going down right now, “taper” fears aside.
For that reason, and on general principals, our comments are not meant as either a buy or a sell recommendation for our readers. For obvious reasons, we don’t usually do that. And in fact, we’ve been selling some profitable positions lately in case the current downturn gets out of hand.
But in general, the Maven hates to be entirely out of the market. This unsung little company could be a nifty way to ride Apple’s next wave of iPhones, other than loading up on the much bigger company’s high-priced and highly volatile stock.
If we guess right, stock in GTAT’s sapphires could be a delightful replacement for the coal Mr. Market seems intent on dumping into our stockings this otherwise festive Christmas season.
Which in turn means is that GTAT—whose margins, like those of most leading-edge technology innovators, are largely invisible—will get a huge boost from an industrial-titan partner over the next few years. Additionally, GTAT’s sapphire technologies are likely to find their way into additional uses and industries now that Apple, a renowned technology innovator, is essentially vetting these technologies.
And wouldn’t it be interesting if Samsung needed GTAT technologies too?
Add this to the company’s LED technologies—likely regarded as being on the “green” side whether we like it or not—a key to the lighting of the future not to mention a still-growing presence in TV, plus the uncertain virtues of its silicon/solar capabilities (also green), and you may have a bargain-priced winner of a stock for the long haul. (Emphasis on the wordmay.)
Today’s investment tip
According to Seeking Alpha, “Shares of GT Advanced Technologies (GTAT) could more than double by the end of 2015. This company experienced a difficult business environment in 2011-2012. Its revenues declined by 78% from $271.6M in Q1-11 to $57.7M in Q1-13. However, its revenues rebounded in Q2-13 to $168M, which may be the start of a long term trend.”
The AppleInsider piece tends to concur with Alpha’s conclusions, observing that “following the Apple deal GT restated its 2014 revenue range to $600 to $800 million…noting that the ‘sapphire segment [is] expected to contribute approx. 80% of the year’s revenue’ and projecting 2014 revenues to double by 2016.”
For that reason, while sapphire glass might be an excellent future solution to the problem posed by smart-phone screen fragility, sapphire-laminated Gorilla Glass may be an optimal current solution. So it’s not surprising that Apple is reported to have recently filed a patent for a new fusion process “that will add [a] sapphire laminate layer” to the screens of “future iPhones, iPads and potentially the iWatch.” Hence, Apple’s contract with GTAT.
Optical products using GT Advanced Technologies synthetic sapphire material. (Credit: GT Advanced Technologies website)
“The contract, detailed in GT’s quarterly results announcement,” according to AppleInsider, “involves the Arizona factory that Governor Jan Brewerannounced would create 700 jobs and employ 1,300 construction workers.
“Apple’s investment,” the article continues, “is a prepayment funding the accelerated development of GTAT’s “next generation, large capacity” Advanced Sapphire Furnace [ASF], which is designed to produce high quality sapphire material at a breakthrough low price.”
A further important tidbit: “Apple is building the facility that will house the GT-owned ASF equipment, and GT will reimburse Apple over the five year contract, beginning in 2015. The contract stipulates a minimum level of capacity and involves supply exclusivity for Apple.” (Italics ours.)
What this really means in plain investor English is that Apple has made a huge commitment to sapphire screen laminate technology and to GTAT’s manufacture of synthetic sapphire materials for the immediate future, to the point where it is effectively underwriting a new factory and creating hundreds of new American jobs to make this happen faster.
There are bright spots here and there in this market nonetheless. One of them could be a company known as GT Advanced Technologies, Inc. (GTAT).
This NASDAQ-traded stock’s website describes the company as a “diversified technology company with crystal growth equipment and solutions for the global solar, light emitting diode (LED) and electronics industries.”
To make a somewhat complex story shorter, GTAT specializes in the production of silicon-based materials primarily intended for use in the technology and solar (PV) industries; and the manufacture, in its specialized furnaces, of synthetic sapphire material in solid single-crystal ingots or “boules.” The site further notes that GTAT “operates in three segments: its polysilicon business, its photovoltaic (PV), business and its sapphire business.”
It’s the company’s synthetic sapphire segment that’s getting the attention these days.
The reason why is quite simple. Sapphires are nearly as tough and strong as diamonds. Synthetic sapphire material, among other uses, can be made into an incredibly durable glass. And wouldn’t you know—the much-maligned (of late) post-Jobs Apple is very, very interested in sapphire glass. Or something close to it, since sapphire glass is still quite expensive to produce.
And that’s where GTAT comes into the picture. According to AppleInsider, GT Advanced Technologies Inc. recently announced “a multi-year, $578 million contract with Apple to supply advanced sapphire material.”
An Apple a day keeps the red ink away
It seems that a major problem with the iPhone, as well as with other major smartphones, is that its tough surface glass—a product called Gorilla Glass, manufactured by Corning (GLW)—will still crack if you drop it the right way, forcing you to put your phone in dry-dock for an expensive glass replacement.
This has troubled Apple’s customers as well as Apple itself, and the company has been looking to solve the problem. According to several pieces inSeeking Alpha, Apple has been researching ways to replace Gorilla Glass screens with sapphire screens. But that presents another problem as it turns out. “Corning’s Gorilla Glass screen currently costs less than $3 per unit, while the same display in sapphire would cost $30.”
The solution: “laminating glass with sapphire would help close this large price differential.”
We are very pleased to have entered into the multi-year supply agreement
that we announced today to provide Apple with sapphire material.
This is a significant milestone in GT’s diversification strategy and it provides
a path to add a recurring revenue stream to our otherwise cyclical
equipment business model.
Under the terms of the agreement, Apple will provide a facility in Arizona
where GT will own and operate ASF furnaces and related equipment. GT
will be employing approximately 700 people to run the operation. We are
very pleased to be creating these new manufacturing jobs in the US.
Apple will also provide a prepayment to GT of approximately $578 million.
We will reimburse Apple for this investment over a five-year period starting
$40 PPS is not a dream not even close to a dream. Depending on your valuation metric and comparing them to peer valuations I can make the case that early 2015 they should cross $40 if not sooner once we get real guidance from management on the apple business. This forecast is hush hush until apple announces their sapphire product lines and usage of the material.
I think I need a bigger boat I feel like its alewdy full of gtat. So I dare continue to add? Maybe I need to buy a truck and back that up and fill it with gtat as well?