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Apple signs deal to secure sapphire manufacturing in Arizona

updated 07:52 pm EST, Mon November 4, 2013

Half-billion dollar agreement with GT Advanced Technologies

Apple is investing in GT Advanced Technologies, a company that produces advanced sapphire material. Following an announcement of the Apple investment by Governor Jan Brewer, details revealed that the iPhone maker has signed a multi-year, $578 million contract in the state that will help fund a "next-generation, large-capacity" Advanced Sapphire Furnace intended to lower the cost to create advanced sapphire-based material.

The factory where the furnace will be built is located in Mesa, Arizona. Apple uses sapphire for both camera lenses and the Touch ID feature of the iPhone 5s. The plant will create at least 700 manufacturing jobs in the first year of operation and generate significant capital investment in the state from the Cupertino manufacturer and other associated businesses. The project also will produce approximately 1,300 construction and other associated jobs for the people of Arizona, and eventually grow to over 2,000 high-paying, technical jobs.

The terms of the deal require Apple to invest in building the building that will hold the AST furnace, and GT Advanced Technologies will reimburse the iPhone maker over the course of five years, beginning in 2015. Apple also gets supply exclusivity on the deal, provided the company buys an undisclosed level of the factory's capacity.

"Apple is indisputably one of the world's most innovative companies and I'm thrilled to welcome them to Arizona," said Governor Brewer. "Apple will have an incredibly positive economic impact for Arizona and its decision to locate here speaks volumes about the friendly, pro-business climate we have been creating these past four years."

"It is a pleasure to welcome one of the most admired companies in the world to our great state," said Sandra Watson, President and CEO of the Arizona Commerce Authority. "Apple's commitment to manufacturing that will rely on renewable energy further demonstrates its forward-thinking, progressive nature and Arizona's advanced capabilities in producing and delivering renewable power. Salt River Project has been instrumental in working with Apple to create additional advanced renewable energy sources that will power next-generation manufacturing."

GT needed a partner to help finance the facility because the new technology will produce "consistently uniform sapphire boules that yield high-quality material for a lower cost of ownership," meaning that margins for GT will be lower than historical norms. This could make the company's sapphire a viable alternative to Gorilla Glass, which it currently uses for the face of the iPhone and iPad line.

While Gorilla Glass is much tougher than normal glass, sapphire is virtually scratch-proof and can be made thinner and lighter than Gorilla Glass, reports AppleInsider. The main problems with using sapphire as a replacement is that it was much more expensive and limited in the quantity that could be produced -- obstacles the new ASF and Apple's deal might be able to overcome, allowing sapphire to be used on a larger scale than the lens and Touch ID uses Apple presently employs the technology for.

Upon publication of the announcements, GT Advanced Technologies restated its fiscal 2014 revenue guidance from $600 million to $800 million, saying that its man-made sapphire business will contribute 80 percent of company's revenue, and that revenues should double by 2016 -- hinting that Apple has more plans for the technology.

Like its own latest facilities, Apple is planning to help GT Advanced Technologies make its furnace facility run on 100 percent renewable energy, the company said. Governor Brewer said that the Apple investment in renewable technologies will help to create "significant new solar and geothermal power sources for the state."

by MacNN Staff



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