Sapphire applications and market changes: from LEDs to consumer electronics

In 2015, sapphire-related components in Apple's iPhone smartphones and smart watches consumed 20% of the world's sapphire capacity. Lens recently announced plans to raise $942 million and invest $532 million to further enhance sapphire growth and finishing capabilities. In 2014, Apple and its partners and suppliers spent nearly $2 billion to build a sapphire display supply chain. Sapphire material supplier GTAT built and installed 2,135 ASF sapphire crystal growth furnaces, and Biel Crystal and Lansi Technologies deployed nearly 200 wire-cutting equipment and 1,000 finishing tools. Grouped equipment. But the project faced many problems, so Apple finally gave up the plan to apply the sapphire display to the iPhone 6. The reasons are manifold, but can be summarized as "too early, too fast, too much." The project is too short and eager to achieve mass production, but the processes and technologies required for crystal growth and processing are still in the early stages of development. But this radical project has laid the foundation for future development: partners have mastered the experience of improving sapphire production capacity and can control costs reasonably. Many manufacturers have also learned how to make complex three-dimensional shapes for Apple Watch cases.
But the question is: Why use sapphire? Compared to the Corning "gorilla" glass currently used by Apple, sapphire is much more expensive, has poorer damage resistance (easy to break), and has poor light transmission. Although sapphire sounds like a luxury brand, Apple will never be used just because of its charm. If Apple finally chooses sapphire, it means that Apple must have the ability to improve the sapphire's resistance to breakage, or to develop unique new features based on sapphire. In order to survive and thrive, the display market needs Apple to take the lead and make new breakthroughs. At present, except for Apple, it seems that only Huawei can influence the market, but compared with Apple, Huawei is still in a backward position. However, alternative technologies continue to emerge, and recently, many OEMs have applied alumina-coated glass to mobile phones, making the screen extremely scratch-resistant.
In 2015, LEDs consumed 78% of the world's sapphire capacity, but oversupply affected market revenue and profitability from the end of 2011. For most suppliers, sapphire prices have fallen below cost, but since 2009 The output of sapphire has risen non-stop. The market has 2-3 times oversupply depending on the product category, and the situation is complex: first-tier suppliers typically operate at high operating rates and maintain growth; second-tier suppliers operate at low operating rates or are completely out of service. BIEMT, Sumitomo Metal Mining and other companies have exited the sapphire market. In 2014, the biggest winners were Monocrystal, Aurora, Namiki, Rigidtech and Crystalwise, which achieved a win-win situation in terms of production and revenue. Global market revenues for seed crystals, ingots and wafers are $1.1 billion. The market for finished parts manufactured by companies such as Bourne Optics, Lans Technology, and Crystal Optech is $1.8 billion. Among them, Saifei's performance is particularly striking, and its sapphire material is applied to the sapphire screen phone of Kyocera, Japan.
Under tremendous price pressures, the sapphire industry has succeeded in reducing costs, but prices are still falling rapidly. In 2015, the average selling price fell by 18%, offsetting revenue from LED wafer shipment growth (+16%). We expect prices to continue to decline in the next few years, although the compound annual growth rate of LED wafer shipments is expected to be 5.2% in the next five years, but due to factors such as price declines, its market revenue will eventually be basically flat.
If Apple gradually phase out existing sapphire fingerprinting technology and integrate "In Display" fingerprint sensors in the iPhone in 2018, the optical wafers market will be in trouble.
Who will provide capacity for the Apple display?
In July 2015, Apple was still actively promoting the project and investigating the supply chain, but did not make a final decision. We envision that Apple will release a sapphire iPhone model in 2016. If the idea is true, then it is expected that Apple will need about 100 million sapphire screens within a year. Apple will continue to invest in the industry chain, such as Apple's investment in advanced technology companies. This means that one or more suppliers need to invest more and strengthen their capabilities to deal with the possibility of Apple sapphire screens.
Despite the risks, many Chinese companies have announced increased investment, such as Aurora, DARX, Eging, Kingsun, Sunphire. Etc. At present, Bourne Optics and Lansi Technology are the two most reliable companies. Mature sapphire manufacturers have strong expertise and good cost advantages, but they also need investors or strategic partners to increase production. Regardless of the Apple order, for these companies, the time left for them is already very short (from the time of the release of the new iPhone in 2016). Therefore, in the spring of 2016, sapphire capacity must be in place. About 2,400 ASF sapphire crystal growth furnaces and their associated equipment from Extreme Advanced Technology are still a worthwhile option. The existing 165kg sapphire production process does not meet the initial target cost given by Apple, but it still has certain competitiveness. Kyropoulos is the second choice in the production process: Monocrystal has just launched a 300 kg sapphire process. Other technologies such as VHGF, EFG or ARC Energy are also competitive, and ARC Energy's new CHES crystal growth furnace produces 300 kg sapphire ingots.
If the opportunity is realized, the sapphire market will grow more than six times in the next two years. Otherwise, many manufacturers supported by investors or parent companies will quickly disappear. For now, the brute force strategy has paid off: weaker competitors have disappeared, surviving companies have huge shipments, and continue to drive down prices and maintain investment, and these companies will strengthen their position in the sapphire market in the future.

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