Apple has initiated a supply agreement with GT Advanced Technologies Inc. to supply sapphire based materials to the consumer electronics provider. According to a Bloomberg published report. Merrimack New Hampshire based GT Advanced Technologies has entered into a multi-year supply agreement to provide the furnaces required to produce sapphire based materials. Apple will front-end a $578 million investment for a new plant to be located in Mesa Arizona that will produce these materials. The new plant is expected to generate at least 700 manufacturing-related jobs while an additional 1300 jobs are expected in plant construction. Bloomberg quotes IHS as indicating that Sapphire material was utilized for the camera lens cover in 2012 and currently the home button on the iPhone 5s model.
This investment represents the second new investment in U.S. based manufacturing. The first was the assembly of Apple’s new Mac Pro’s at a facility in Texas.
Speculation indicates that the sapphire based lens material will eventually be utilized in Apple’s line-up of smartphones and electronic tablets, with further speculation that the first application might be Apple’s rumored new smartwatch product rumored to be coming sometime in 2014.
This new announcement is consistent with Apple’s strategic sourcing strategies, namely expending up-front monies to secure strategic multi-year supply agreements for key materials and components along with up-front investment in capital equipment and tooling. Much of Apple’s investments in manufacturing process equipment are held at certain of its outsourcing partners. Apple utilizes this strategy to lock-in supply as well as supplier loyalty in areas such a processor chips, DRAM, LCD displays and other key components. However, the company’s 10K securities filing is quick to note: “Therefore, the Company remains subject to significant risks of supply shortages and price increases that can materially adversely affect its financial condition and operating results.”
There is nothing better than hedging your strategies, both in supply and with investors.