What are they making at the Apple (GT) plant? And why?


While significant startup challenges have slowed progress on Apple’s sapphire-glass factory in Mesa, the massive facility is nearly finished and is ramping up production of the scratch-resistant material, GT Advanced Technologies CEO Tom Gutierrez recently said.

Both Apple and GT Advanced Technologies have been tight-lipped on details about Project Cascade, a joint effort to mass-produce sapphire glass at the former First Solar building in east Mesa.

The glass is used to cover camera lenses on Apple products and for the fingerprint-reading components on its newer devices.

During a quarterly-earnings call with investors on Tuesday, Gutierrez declined to give specifics about the timing or volume of sapphire production but provided an update on efforts to get the 1.3 million-square-foot factory up and running.

“The build-out of our Arizona facility … is nearly complete, and we are commencing the transition to volume production,” Gutierrez said. The company expects to reach “full operational efficiency” in early 2015, he said.

“Progress has admittedly been slower due to some of the startup challenges that we’ve faced,” Gutierrez said.

At one point, there were 1,200 construction workers swarming around the facility to bring power, water and other infrastructure into the building shell, Gutierrez said. The company has also hired hundreds of workers who had to be trained and absorbed into a four-shift, 24/7 operation, he said.

GT incurred about $45 million in sapphire-production ramp-up costs during the second quarter of 2014 and expects another $45 million in costs during the second half of the year, Chief Financial Officer Raja Bal said during the conference call.

“The Q2 expense was greater than anticipated and reflects the complexity and challenges we’ve had ramping the operation,” Bal said.

In a Thursday U.S. Securities and Exchange Commission filing, GT noted inefficiencies in fine-tuning its production process. The company has taken losses on products not deemed to be salable and on inventory spoiled as a result of construction-related interruptions, according to the document.

Representatives from Apple and GT did not respond to a request from The Arizona Republic for further comment.

Despite the challenges, the company remains confident about the long-term potential of its sapphire glass and expects to receive its final prepayment of $139 million from Apple this October. Apple has paid the company $439 million so far, Bal said.

Apple bought the vacant building near Elliot and Signal Butte roads from First Solar for about $113 million and is leasing it to GT.

The plant is expected to employ 700 workers over the next five years.

GT on June 30 announced plans to move most of its sapphire-fabrication operations to the Mesa plant while focusing its other facility in Salem, Mass., on crystal growth.

While the realignment resulted in 70 layoffs, the company reported having more than 1,000 employees in the U.S., as well as several hundred more temporary workers.

Apple was awarded a $10 million incentive package from the Arizona Commerce Authority to locate the plant in Mesa, and the Mesa City Council approved the creation of a foreign-trade zone that allows it to operate outside of standard U.S. customs rules and avoid paying duties on imported goods.

Some have speculated Apple may use the ultra-hard sapphire glass produced by GT for the display on its next smartphone.

Forbes contributor Mark Rogowsky recently reported at least one industry analyst believes GT has enough sapphire stockpiled to be used in the iPhone 6, rumored to be unveiled in September.

6 uses for sapphire glass

GT Advanced Technologies is ramping up sapphire glass production for Apple at a factory in Mesa. Here are six products that typically use the ultra-hard material, according to Cult of Mac, a website devoted to Apple news:

1. High-end watches: Protects the face of your watch from getting scratched every time you brush up against something.

2. Bar-code sensors: Helps scanners resist the wear and tear when the store clerk drags your groceries across the glass.

3. Aircraft displays: The glass can withstand extreme temperatures, making it a good tool for the aviation industry.

4. Missile optics: Sapphire’s strength helps the optics avoid damage as a missile rockets toward its target.

5. Bulletproof glass: The material can be found in some armored vehicles and military body armor.

6. Smartphones: Apple has used the glass to cover camera lenses and for its fingerprint scanner.


by Parker Leavitt, The Republic | azcentral.com