On September 9, 2014, Apple unveiled it’s much awaited iPhone 6. Similar to the launch of any other iPhone, there was a lot of speculation preceding the launch of the iPhone 6. A chief area of interest concerned the distinctive protective cover glass of the phone. Traditionally, iPhones have shipped with Corning’s Gorilla Glass as its protective cover glass. However, because of Apple‘s deal with GT Advanced Technologies, a manufacturer of sapphire crystal products and manufacturing equipment, there were rumors that the iPhone 6 would have a sapphire cover instead of Gorilla Glass. Recall that this deal consisted of Apple funding the creation of a large sapphire crystal fabrication facility and when news of it broke last November 4th, Corning GLW -1%‘s stock fell around 4.0% and GTAT’s stock rose 20.5%. Clearly, Apple is committed to GTAT’s sapphire products, though no time frame around their use has been announced.
Given Apple’s silence on its interest in sapphire products, speculation around the use of sapphire as a substitute for glass in Apple products has continued, even as we now know that, for the present at least, Corning’s Gorilla glass remains the incumbent on the iPhone. (GTAT stock is indeed down sharply.) Apple reported that the iPhone 6 comes with an ion-strengthened glass. Though Apple did not explicitly mention it, we believe that the iPhone 6 has Gorilla Glass as its cover glass. This should help sustain Gorilla Glass? revenue for another year.
Apple has not explicitly mentioned the use of Corning’s Gorilla Glass on iPhone 6 or the iPhone 6 Plus. However, there have been indications that the iPhone 6 might have Gorilla Glass protecting its display. Here is why we think iPhone 6 comes with Gorilla Glass:
1. During its second quarter 2014 earnings meet, Corning announced that it expected its Gorilla Glass sales to pick up in the third quarter, driven by new smartphone launches.
“Now turning to Specialty Materials, we expect segment sales to be up about 10% versus the second quarter driven mainly by higher Gorilla Glass volume. We expect an increase in Gorilla Glass volumes driven by new model launches leading to sequential sales in gross margin growth.”
In our article about Corning’s second quarter earnings, we had pointed out that this just might be a hint towards the launch of iPhone 6 in September 2014.
2. TrendForce, a market research organization, reported that sapphire manufacturers were facing lower production rates due to issues with sapphire glass processing. Indeed, GTAT’s processes, as exciting as they are, are relatively new, especially with larger substrates. These production issues reduced the likelihood of sapphire on Apple’s iPhone 6.
3. A few hours before the launch of the iPhone 6, Corning’s CEO, Wendell Weeks, on his interview with CNBC said “We keep their secrets. So, regretfully I am going to keep Apple’s secrets. You only have to wait a few more hours and you’re gonna see a really exciting launch from them. I’m really excited about it”. We believe that this statement hints towards Corning’s role in the iPhone 6.
4. At the launch, Apple announced that both the iPhone 6′s come with ion-strengthened glass. The term “ion-strengthened” is something that is associated with Gorilla Glass. Gorilla Glass is manufactured through an ion-exchange process which involves replacing sodium ions in glass with potassium ions, which helps make it stronger.
If what we believe is true, then this means that Corning has been able to retain Apple as its customer and should be able to sustain its revenue from Gorilla Glass for at least another year. Additionally, Corning should be able to generate higher margins on sales to Apple.
In line with the market trend of devices with large displays, Apple launched its iPhone 6 and iPhone 6 Plus with screen sizes of 4.7 inches and 5.5 inches respectively, compared to 4 inches on the iPhone 5. Since Corning is able to generate higher margins on larger sized glass due to its fusion based manufacturing process, the larger screen size on the iPhone 6 should drive revenue and margins for Corning’s Specialty Materials division.