In the early morning of September 10th, Beijing time, Apple’s new product launch conference was held as scheduled. Apple released two new products at this conference - iPhone 6 in two sizes and the wearable product Apple Watch. However, as an important innovation in the hardware field this time, the application of sapphire in Apple's new products is lower than industry expectations. Sources in the supply chain said that the capital market has high expectations for sapphire. Domestic and foreign manufacturers are targeting sapphire for production capacity expansion, and the sapphire market still has good market expectations in the future.
Apple only partially uses sapphire
With the unveiling of Apple’s new products, some previous rumors in the industry have been confirmed. Apple will launch two sizes of iPhone 6 and wearable watch Apple Watch. Only the display of Apple Watch is entirely made of sapphire material. This has frustrated the industry’s previous expectations for the use of sapphire in iPhone displays.
After the Apple press conference, the stock price of GTAT, Apple’s official supplier of sapphire, fell sharply by nearly 13%, and all the gains for a month were eroded. A chain reaction also occurred in the A-share market. On September 10, sapphire concept stocks such as Tiantong Co., Ltd., Xinya Processing, Southwest Pharmaceuticals, Dongjing Electronics, Han's Laser, etc. all fell sharply.
Due to limited exports, the global sapphire industry has faced overcapacity for a long time. However, after Apple acquired GTAT in the early stage and announced that it would use sapphire materials for hardware in the future, the capital market showed strong expectations for the better. A research report pointed out that Apple's annual mobile phone shipments exceed 100 million units. If sapphire materials are used in the display screen field, the industry's supply and demand will essentially reverse. Moreover, Apple’s demonstration effect will inevitably trigger the industry to follow suit, which will cause the sapphire market to face a serious capacity gap for a long time to come.
Apple used sapphire material for the first time in the camera of iPhone 4S. In iPhone 5 generation, sapphire was applied to the entire home button. This makes the future application direction of sapphire gradually clear in the industry. According to previous expectations in the industry, Apple's next step will be to replace the entire cover glass with sapphire material. A widely circulated version is that the large-screen version of the iPhone 6 will use sapphire. But this expectation ultimately failed to materialize.
Production capacity expansion depends on next year
"This situation is actually expected by the industry, but the capital market has too high expectations for it, which has led to pressure on valuations." Chu Yuchao, research director of LEDinside, said that in the third quarter of this year, the prices of sapphire ingots, flat sheets and patterned substrates all fell slightly, and some products showed a quarterly decline of 5%-10%. This has already indicated that Apple will be unlikely to use sapphire to replace cover glass this year.
Chu Yuchao also believes that not using sapphire in iPhone 6 is just a stop-gap measure. Considering Apple’s huge capital acquisition and subsequent investment in GTAT in the early stage, there is no reason not to use sapphire material in the later stage. Information from the supply chain shows that Apple is more likely to launch sapphire-equipped iPhones in the first quarter of 2015. "The release of sapphire production capacity will still come, but the time will be next year."
Some industry insiders said that Apple has used sapphire in new wearable products this time, which can be interpreted as a positive signal. Ored borrowed from Southwest Pharmaceutical and Xinya Processing to acquire 10% of Sapphire Saifei's equity. The sapphire industry is still attracting a large number of listed companies to enter, which also means that more industrial capital is targeting the future development direction of the field of smart terminal hardware materials.
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