Mercurial and ever-changing, the world of Apple (NASDAQ:AAPL) watchers and analysts have now flip-flopped to a new position, that of discounting the use of sapphire in the iPhone 6, at least this year. Just as the iWatch has grown into an impossible collection of contradictory features and release dates based on the ever-popular “reliable insider information,” so the iPhone 6 is starting to become the subject of exaggerated “flavor of the week” rumors.
This is perhaps inevitable. Apple (AAPL) manages to retain extraordinary secrecy about its products, to the point where the very existence of the iWatch has been doubted by a handful of analysts. With only the vaguest and most misty of information available, Apple investors and enthusiasts are frustrated by the lack of data on which to build a logical investment strategy for the next few months. This leaves the field open for overblown rumors and well-argued but ultimately futile scenarios alike as the Apple analyzing industry attempts to win page views.
The latest “fad idea” is that Apple will not use sapphire crystal at all for the iPhone 6 this year, and will possibly only use the material for the iWatch or a hypothetical “iPhone 7” years in the future. Some arguments in favor of this notion are thoroughly reasoned and quite convincing, such as that presented by Mark Hibben on Seeking Alpha.
Mr. Hibben argues that the lack of a fall in Corning’s revenues means that Gorilla Glass is to be the material used for the iPhone 6 screen. Corning’s rising earnings and 20% boost in Gorilla Glass volume are both cited as significant. Yet these arguments overlook an important factor, that Corning might well have posted these gains even if Apple Inc. suddenly went out of business.
Much of Corning’s revenue is derived from sources other than Gorilla Glass, most notably the sales of fiber optic materials. Additionally, smartphone manufacturers are proliferating, and existing smaller concerns are experiencing explosive growth. For example, Xiaomi, manufacturer of the metal-cased iPhone lookalike Mi 4 handset, has grown to a multibillion dollar company in just four years, and is expecting sales to continue their steep ascent.
This is negative and circumstantial evidence, but there is more tangible proof that sapphire remains likely as an iPhone 6 screen material. Primary of these is the colossal scale and speed of GT Advanced Technologies’ (GTAT) Mesa, Arizona plant’s construction, and the delivery of huge quantities of sapphire crystal to Apple from March onward.
While it is true the iWatch is likely to be released soon as well, it seems unlikely that Tim Cook and Jony Ive would place a nearly $600 million bet purely on an untried product in the poorly received smartwatch form factor.
The iWatch may well have a sapphire display, but placing all of Apple’s eggs in one completely unproven basket seems like an amateurish, clumsy move for a wily executive like Mr. Cook to carry out. Though there is no concrete evidence to confirm the idea, this author at least believes an on-time iPhone 6 sapphire display release is very likely.
