GTAT Receives US$29 Million ASFTM Furnace Order from Chinese Customers

GT Advanced Technologies announced that it has received a follow-up order for ASFTM furnaces worth $29 million from an existing ASF customer in China. The company believes that these furnaces will be used to produce sapphire for the mobile device market. The order is scheduled to be delivered by the end of 2012 and revenue is expected to be included in the company's 2012 revenues, ranging from $925 million to $975 million.

GTAT noted that the company has reached an evaluation agreement with a number of ASF customers and is working with a number of manufacturing partners to actively provide samples of sapphire screens produced by the ASF platform, which will be used in mobile and point-of-sale (POS) equipment. GTAT believes that the opportunity in the sapphire mobile device market will bring a large number of ASF orders to the company in the second half of 2013.

The company noted that several factors have spurred the industry's recent interest in using the ASF platform to produce sapphire, which they believe can replace the materials currently used in mobile and POS devices. These factors include sapphire's superior strength, durability and scratch resistance, and it also offers significant brand differentiation advantages with increased user experience. GTAT's ASF platform will meet the requirements for crystal growth in quality and volume production for these applications.

Cost is an important factor to consider in the production of mobile devices, and given the strong value proposition of sapphire, its cost is expected to be within acceptable limits. GTAT expects that the cost of growing and manufacturing sapphire for mobile devices will be much lower than the cost of LED applications, including:

• The ASF crystal growth process can be optimized to increase the yield of available materials, resulting in lower costs compared to ingots/screens and cores/wafers;

• GTAT is actively collaborating with consumable suppliers and is expected to significantly reduce costs through the continued expansion of the Asian supply chain;

• The tolerance requirements for mobile device sapphire screens are much lower than those for open-box surfaces in high-brightness LED (HB-LED) manufacturing, further reducing cycle time and reducing consumable costs;

• Manufacturing costs are expected to decrease due to the ability to cut artificial ingots into ingots rather than cores;

• When manufacturing sapphire for mobile devices, multiple manufacturing steps can be eliminated, including chemical mechanical polishing (CMP) and coarse grinding, where the latter is being replaced by a faster grinding process;

• Mobile screens can be manufactured using the mass production capacity of current Asian subcontractors' existing polishing and grinding equipment, eliminating the need for new manufacturing equipment.

Therefore, the company believes that once a mobile device is commercialized with a sapphire screen, its cost of ownership will be comparable to the cost of ownership of the current solution. Specifically, GT estimates that the price of a finished sapphire smartphone screen will be $10-20 higher than the OEM's existing screen solution, depending on the vertical integration of the OEM or its manufacturing partners. .

Given the strong overall value proposition of the ASF sapphire screen, initial feedback from industry leaders indicates that this cost difference for a premium product is acceptable. The main factor affecting this consideration is that the sapphire produced by the ASF platform has first-class strength and scratch resistance, and is expected to reduce the probability of screen rupture or breakage, thereby improving the overall user experience. In addition, GTAT also pointed out that the expected price difference between the sapphire produced by the ASF platform and the current solution is lower than the cost of replacing the broken screen by the consumer, and lower than the cost of the consumer to purchase the screen saver and the protective case.

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