There have been plenty of rumors building around the hotly anticipated Apple (AAPL) iPhone 6, but one of the more interesting ones has nothing to do with advanced new capabilities or moving to a phablet size.
Late last year, Apple signed a $578 million contract with GT Advanced Technologies (GTAT) to supply sapphire glass via a new Arizona factory and large-capacity furnaces to produce the material in quantity. Presumably, the material would be used in the rumored Apple iPhone 6.
It’s looking like Apple and GTAT are moving quickly toward production and that the factory will have the capacity to churn out between 100 million and 200 million 5-inch iPhone displays protected by sapphire glass.
If that’s true, and if the new Apple iPhone 6 features a big slab of sapphire glass, the numbers that Apple moves alone will quickly launch sapphire glass into the mainstream. If other smartphone manufacturers follow suit, Corning (GLW) — the maker of Gorilla Glass — will find it suddenly has competition.
What is sapphire glass? It’s not the gemstone, it’s a synthetically produced crystal made from aluminum oxide. It’s extremely hard, scoring a 9 on the Mohs scale (in comparison, diamond rates the highest score of 10, and Gorilla Glass is reported to be somewhere in the area of 7). Sapphire glass has been around since 1902, and has been used commercially for a range of applications including lasers, armored windows, camera lenses and semiconductors.
Who has the most to lose if if Apple manages to hit a home run with sapphire glass in the Apple iPhone 6? That would be Corning, which has enjoyed a virtual monopoly in the consumer electronics market with its Gorilla Glass line. According to Corning, there’s no concern. In fact, its website has a page dedicated to the issue. (The suspicious among you will note that the very act of putting up such a page indicates that there is cause for concern).
Among the facts presented by Corning:
- As the “cover glass of choice for the consumer electronics industry,” Gorilla Glass has been used in more than 1.5 billion devices
- The sapphire covers currently in use are on watches that are “much smaller than a mobile phone and are two to three times thicker than Gorilla Glass.”
- “In one of our commonly accepted strength tests, sapphire breaks more easily than Gorilla Glass after the same simulated use.”
- “Additionally, sapphire’s cost and environmental hit are huge issues.”
In other words, nothing to see here. Sapphire glass hasn’t been proven on something as big as a smartphone, it’s thick (which presumably results in a bigger smartphone with a display that could be distorted or less sharp), it’s expensive and far from green. And, despite all the media frenzy, the stuff doesn’t live up to the toughness hype.
But that’s according to the Gorilla Glass maker…
Outside of Corning, an entire industry is anxiously waiting to see if the Apple iPhone 6 adopts sapphire glass. If sapphire glass lives up to the hype and is essentially scratch and shatter-proof, there are a whole lot of iPhone owners who may choose to skip buying a protective case.
Plastic and metal shells to protect scratch-prone smartphones are now a $1 billion industry, and a visit to any big box electronics retailer will show that the bulk of these cases are made for iPhones.
Some of the biggest consumer electronics accessory makers — like Logitech (LOGI) — are only now targeting the smartphone market. They might be ramping up production on an accessory that’s about to fall out of favor with consumers. Why encase a shiny new Apple iPhone 6 in a bulky case if sapphire glass means no additional protection is necessary?
Of course, this grim scenario has caveats.
For one, if you own an iPhone 5 or iPhone 5s, you know that the glass front is the least of your worries when it comes to scratches — that aluminum back is a scratch magnet. Unless Apple also uses sapphire glass on the back, a protective case will still be a necessity.
Many iPhone owners have multiple cases to customize their device; some models also add extra functionality like supplemental battery power. Current iPhone personalization is limited to gold, silver and space gray (or the more colorful but less powerful iPhone 5c), making a protective case a must-have for standing out from the crowd.
There’s no reason to believe the Apple iPhone 6 would offer anything like the customization options Google’s (GOOG) Motorola Moto X does, so getting a more unique look for an Apple iPhone 6 would still mean buying a case.
Then there’s the cost. Estimates have sapphire glass running at ten times the cost of the latest Gorilla Glass. That alone may limit its use to protect the entire display of a smartphone — at least for now. But f Apple and GT Advanced Technologies ramp up production of sapphire glass, that cost disadvantage will start to disappear.
Apple’s iOS may have lost the overall smartphone market share crown to Android years ago, but the company is still hugely influential in the mobile space. The Apple iPhone 6 is likely to repeat the performance of previous models by being the top selling smartphone on the market when it’s released.
If the Apple iPhone 6 sports a sapphire glass protected display as rumored, that alone will launch sapphire glass into the mainstream and make it an instant competitor to Corning’s Gorilla Glass. And where Apple leads, other companies often follow…
If that happens, expect GLW to take a hit, while GTAT and other sapphire glass manufacturers who are able to ramp up capacity to take advantage of demand are poised to benefit.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.