GT Advanced Technologies heads downstream with Apple sapphire supply deal

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Update. Iconic consumer electronics firm, Apple, is investing US$578 million in a new manufacturing plant to be operated by GT Advanced Technologies (GTAT), creating 700 jobs in Arizona, US.

Leveraging its technology in making sapphire substrate equipment, GTAT and Apple have signed a multi-year sapphire materials agreement that will contribute around 80% of 2014 revenue, highlighting the continued weakness of the upstream PV materials market.

GTAT reported third quarter revenue declined significantly to US$40.3 million including US$28.6 million in polysilicon, US$4.4 million in photovoltaic, and US$7.3 million in sapphire.

However, the company also reported that approximately US$18 million of revenue in the quarter was related to the company terminating an outstanding order for TCS equipment used in polysilicon production and booking the non-refundable deposit.

Revenue in the second quarter was US$168.3 million and US$110.1 million in the third quarter of fiscal 2012. Revenue for the first nine months of 2013 was US$266.4 million compared to US$631.2 million for the first nine months of 2012.

The company reported a third quarter loss of US$38.1 million, compared to earnings of US$11.9 million in the second quarter and US$2.3 million for the third quarter of fiscal 2012. 

Net income for the first nine months of 2013 was a loss of US$44.9 million compared to earnings of US$96.2 million for the first nine months of 2012.

Tom Gutierrez, president and chief executive officer of GTAT said in a conference call to discuss financial results: “Our PV and poly businesses performed largely in line with our expectations in Q3. Although we remain encouraged by improving fundamentals in the solar market, we continue to believe that the next major PV capital equipment cycle is not likely to begin until late 2014 at the earliest. And until then, we expect limited contribution from our PV business.

“Since the close of the quarter, we have continued to book new DSS orders as certain customers continue to capitalise on the opportunity to buy DSS650 furnaces as well as our new DSS850 technology at competitive pricing as we convert inventory to cash.”

Polysilicon opportunities

GTAT said that new orders during the third quarter were approximately US$7 million including Us$3 million of PV and US$4 million of sapphire orders, highlighting the continued difficult market conditions for upstream material equipment suppliers.

However, management noted in the call that polysilicon opportunities remained on the horizon but not until 2015.

“With respect to our polysilicon business, we continue to be optimistic about our long-term opportunities as our pipeline in the Middle East continues to develop, supply and demand are coming into balance and pricing appears to have bottomed out, with an expectation that it will begin to rise over the next six to nine months. We also see China's preliminary ruling on silicon tariffs as being quite favourable for our largest customers, and particularly for OCI, whose Phase 4 expansion remains in our backlog. In the near-term, while polysilicon opportunities exist, we do not expect any appreciable increase in bookings until 2015, and polysilicon revenues are likely to remain light through 2014,” noted Gutierrez in the conference call.

GTAT also reported total order backlog stood at US$658 million. This included US$301 million in the polysilicon segment, US$2 million in the PV segment and US$355 million in the sapphire segment. Included in the total backlog was approximately US$62 million of deferred revenue.

Full-year guidance

Due to the weak market conditions, GTAT revised down full-year financial guidance. Revenue is expected to be in a range of US$290 million to US$320 million.

PV is expected to only account for 10% of 2013 revenue, 73% from polysilicon and 17% from sapphire.

The company also indicated that it expected 2014 revenues to be in the range of US$600 to US$800 million with its sapphire segment comprising up to approximately 80% of the year's total revenue.

Apple deal

Under the deal with Apple, GTAT will manufacture components for the technology giant, which has been inreasingly using sapphire in its smartphones.

Apple said its plant would be “100%” run on renewable energy.

Arizona state governor, Jan Brewer, said she was “thrilled” to welcome Apple to Arizona, adding Apple’s “investment in renewable energy will also be greening our power grid, and creating significant new solar and geothermal power sources for the state”.

The facility Apple has acquired for GTAT is the former vacant thin-film plant owned by First Solar. GTAT is paying back the Apple investment over a five-year period.

Additional reporting by Lucy Woods

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