Analyst: Apple to take sapphire market to new heights
Yole Developpement has revealed that the sapphire industry has ended an 18 month period of depressed pricing and reached $936 million in revenue for wafer products, helped by an increase in LED demand due to growing adoption in general lighting and a resilient LCD backlight market. In addition, the analyst forecasted that Apple will transform the sapphire industry this year.
The saving grace of the segment was the new consumer electronics (CE) applications: camera lens and fingerprint reader covers, mostly driven by Apple in 2013, explained Eric Virey, senior analyst at Yole Developpement.
Yole predicted that overall, the growth in wafer demand will be enough to justify a capacity increase toward the end of 2014.
For the longer term, Yole Developpement analyzed opportunities of alternative LED substrates (GaN and Si) but concluded that sapphire will retain > 90 per cent of the market through 2020.
Yole Developpement's market report entitled 'Sapphire Applications and Market: From LED to Consumer Electronics' provides a detailed analysis of the status and prospect of the sapphire industry including recent trends and market drivers in established and emerging applications. The report described and analyzed why Apple and GTAT are investing more than $1 billion in sapphire manufacturing.
The report showed that after almost two years of losses, core prices increased by more than 50 per cent in 2013; tier-1 sapphire vendors are finally selling at prices close to breakeven costs. After a short pause, Yole Developpement expects the uptrend to resume through Q2 and Q3. But leading vendors' interests are not to increase prices above levels that would allow tier-2 competitors to generate a profit as well.
We therefore expect prices to stabilize by the end of the year. Due to strong competition, finishing companies didn't pass the higher material costs on to their customers. Wafer prices remained stable in 2013 but will go up slightly in 2Q14. For PSS, which now dominates with 85 per cent penetration rate, prices could increase faster as supply currently falls short of demand in Taiwan, said Virey. This will continue until leading suppliers increase capacity and emerging players in China ramp up and enter the supply chain later in 2014. Overall, sapphire prices should stabilize by the end of 2014 and start decreasing again in late 2015 as the industry keeps improving its cost structure.
Sapphire has been used for years in various luxury cell phones. In 2013 Yole Developpement indicated that adoption in more accessible models could start in 2014. This just happened with the introduction by Gionee of the first 'non-luxury' (<$1000) smartphone to feature a sapphire display cover. If adopted by leading cell phone OEMs for their flagship models, total sapphire demand could increase by up to 2x by the end of 2014 and 20x by the end of the decade.
On November 4th 2013, GTAT and Apple announced a partnership to set up a large sapphire manufacturing plant in Mesa, Arizona.
Analyzing the deal Yole Developpement reached the conclusion that exiting 2014, the plant could reach a capacity equivalent of more than twice the current worldwide capacity. What for? Demand for home buttons and camera lens covers are expected to increase in 2014 and 2015, but even with aggressive forecasts for smart watches (and assuming that Apple uses sapphire for its own model which Yole Developpements analysts don't believe it will), the company could still tap into the existing supply chain to procure the sapphire it needs. It is therefore difficult to justify this $1 billion investment unless new applications requiring a lot of sapphire are coming to market. Yole Developpement analysis considers cell phone display covers to be the most likely outlet for this capacity.
Yole Developpement modelled the Mesa operations and believe that the plant will make sapphire slabs that will then be sliced and polished by Apple subcontractors in China. The simulated slab cost of $6.40 per part would enable a $17 cost per finished display cover, with a path for <$13 ASP in the midterm. The plant could deliver an equivalent of 42 million display covers in 2014 and more than 85 million in 2015.
- Paul Buckley
EE Times Europe