However, if you think carefully about the stage of the industry, the main problems encountered at this stage, and where the future will go, can almost completely lead to different conclusions. Industry organizations have long tracked the sapphire industry supply chain, and in the research report published in the early months of the iPhone 6 in the early months of 2014, they reminded customers that there is no indication that the iPhone 6 will use sapphire to protect the glass, and then the iPhone 6 is really like the industry. The agency did not use sapphire cover glass. GTAT failed to fulfill its contract to supply sapphire glass as scheduled, and it also declared bankruptcy after the financial crisis.
The picture shows the stock price trend of GTAT since 2013. 
However, the sapphire market panic caused by the abandonment of the iPhone 6 and the bankruptcy of GTAT is overreacted. According to industry analysts, there are signs that the sapphire market is recovering rapidly after a period of pain, perhaps based on the long-term perspective, which is now at the turning point of the industry's turnaround. The failure of GTAT not only does not represent the end of the sapphire industry, but rather helps the industry and investors to further clarify the correct direction in which the industry should move forward.
First, the traditional sapphire market supply and demand model
Excluding the impact of consumer electronics, we first observe the supply and demand structure of the traditional sapphire market, which helps us understand some of the phenomena that have occurred in this industry in the past. In the past, the sapphire industry, in addition to the sapphire substrate, mainly supplies the window market. The window market is biased towards customization, and the price elasticity is small. The substrate market, which accounts for more than 70% of the market demand, depends on the downstream sapphire lining. The demand for the bottom LED epitaxial wafer, the demand for the epitaxial wafer is highly correlated with the boom of the LED industry, and the elasticity of demand for the substrate is also small.
In other words, if the downstream demand is very good, the substrate will easily absorb the cost even if the price is extended. In other cases, if the downstream demand is not good, even if the price of the substrate is reduced by more than half, the epitaxial plant will save a little more inventory than the open one. In addition, it will not stimulate the extra demand. Therefore, the demand elasticity of the sapphire market is generally small.
From the supply side, the LED substrate mainly uses the sapphire grown by the KY method, and the supply elasticity of the KY method crystal growth is very small.
One of the reasons is the requirement for equipment. It takes a long period of time for equipment to be ordered, installed, trial-produced, and finally put into production, and the rate of climb is difficult to respond to the market's excess demand. Another reason is that the learning curve is slower and slower than that of the general industry in the process of crystal growth, which leads to the existence of skilled crystallizer becoming a key bottleneck. KY method is actually a highly specialized technology. Sexual human capital investment, strong fluctuations in supply and demand increase the uncertainty of the long-term return on this investment. Ordinary Changjing enterprises are not willing to cultivate a large amount of money, considering the long return on investment cycle and the risk of loss of talent flow. Therefore, the total amount of human resources with such a single professional skill is relatively scarce. Once the market demand is skyrocketing, even a high salary may not be able to find the right skills, and the technicians who simply recruit the general skills can meet the production requirements.
These two factors determine that the supply elasticity of the KY sapphire substrate is also very small.
Supply elasticity is small and demand elasticity is small. What does this mean? Just like the roller coaster market we saw in the past, the price of sapphire substrates. When China's large number of epitaxial chip companies increased production capacity in 2010, the market demand for substrates increased sharply. The price of 2-inch films once soared to 30 US dollars. Then, under the stimulation of high prices, a large number of sapphire projects were launched, and these projects will be completed in 2012. When the production capacity was released, the price plummeted to 5 dollars below the production cost.
Second, consider the supply and demand model of sapphire industry after consumer electronics
Apple imported sapphire from the iPhone5 into the lens protection cover, and then used the iPhone5S to use sapphire for the home button, and the prospects for iWatch and mobile phone protection glass have greatly changed the supply and demand structure of the sapphire industry.
Sapphire materials are widely used in apple products
First of all, from the perspective of demand, first look at iWatch, taking Orient as an example. The company claims that the actual number of orders signed for the 2-inch ingot in 2015 has reached 30 million mm, and the growth rate of sales from 2016 to 2018 is predicted. It is 100%, 33%, 19% and has remained stable since 2019. The 30 million mm 2 inch ingots are equivalent to one-third of the global LED substrate market in 2014. The sapphire consumption of only one iWatch device will exceed the consumption of the LED substrate market by 2017 at the latest.
The important sales contract that Ored is performing (Note: The data comes from Oride's public information)
According to industry organizations , under the leadership of Apple, Huawei, VIVO, Coca-Cola and other Chinese manufacturers are quite active in adopting sapphire cover phones, and their strategies are more flexible. Due to insufficient production of sapphire cover, the current sapphire cover phone is mainly equipped with a high version (so-called collector's edition). If the production bottleneck is solved in the future, it will become a standard version. In addition, some mobile phone manufacturers also plan to launch mobile phones using sapphire windows on their mainstream high-end models, so even if you do not consider the amount of glass for the iPhone cover, this market will grow into a market with annual consumption of more than 50 million mm.
And even for the iPhone, the signs that industry organizations are tracking their supply chains show that Apple has not abandoned the use of sapphire as a cover glass.
It is entering the consumer electronics supply chain that the sapphire's demand elasticity is greatly enhanced. The sapphire used in consumer electronics has a certain degree of luxury attributes, and the price elasticity will be greatly enhanced. In other words, different consumers may have different willingness to pay for sapphire. If the price is too expensive, then only a few people can own it, but if the price can drop more, it will certainly stimulate more demand, and the demand curve will change. Into a slanted curve. If we combine the rigid demand of the substrate market, the sapphire market demand curve becomes a curved curve as follows.
Look at the supply side, because the scope of consideration is extended to consumer electronics, although the HEM process capacity that is not so suitable for LED substrates must be taken into account. One of the advantages of the HEM method is that the crystal growth process is more automated, and it is possible to see multiple machines by one person, which is relatively independent of the human bottleneck. The current supplier of equipment is mainly GT, which is relatively standardized, greatly shortening the debugging and engineering familiarity. The time of the device. Therefore, the supply curve is also relatively elastically expanded.
Then the question comes, how much has the supply elasticity expanded? Obviously there is a problem here, and everyone’s views are so inconsistent. In the grand prospect of GTAT describing Apple, this supply curve is almost horizontal, that is, as long as you can afford the money, I can supply it. So one of the most insane business decisions in history began under the stunned world, and then broke down in the eyes of the world.
The picture shows the various defects that the oversized sapphire crystal blocks grown by GT Company's HEM method failed to overcome.
However, GTAT, which has no actual crystal growth experience, rushed to produce 500 sets of 200 kg HEM process crystal furnaces in Arizona without skilled workers. It is necessary to know that the long-term heat exchange method of Changjing in China started from 80 kg to 90 kg and then to 100 kg to 110 kg for several years, because even the HEM method known as "menuized" production actually There are still a lot of know how in the process of crystal growth, such as to overcome stress problems, purple color problems and so on. Even though the HEM method changes the supply curve of the sapphire substrate, it may be just a slight tilt, but it is not lying down. This is probably one of the biggest lessons that GT has learned from the tragic failure of GT.
Third, the actual possible sapphire supply and demand structure model
After deriving from the above, we can now derive the overall supply and demand status of the sapphire industry. We will put together the supply curve of the HEM method and the demand curve for the introduction of consumer electronics demand to observe the new market equilibrium.
At this stage, the market equilibrium may be in the stage of mainly the demand of the substrate market, and the demand for some consumer electronics. The equilibrium point is E1. However, with the gradual release of new capacity, the production capacity can satisfy more consumer electronics. The market demand, the new equilibrium appeared in E2, the overall market size evolved from P1E1Q1O to P2E2Q2O, and the market scale expanded rapidly. Considering the differential pricing between the substrate customer and the consumer electronics customer, that is, if an effective price discrimination strategy is implemented, the actual market size will be the part of P1E1E2Q2O minus E1E2E0. Driven by the long tail demand of consumer electronics, the sapphire industry will gradually enter a good period of profit and loss.
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