Feeds

Secrets of Apple's mysterious Arizona sapphire factory: Our expert whispers all

How Tim Cook aims to shuffle his mountains of money around

Internet Security Threat Report 2014

As already noted here at El Reg, Apple is spending some of its vast cash pile on setting up a sapphire production plant in Arizona.

It has not been silly enough to try and manage the plant itself – that will be the responsibility of partner mineral crystal firm GT Advanced Technologies – but it is providing a vast pre-order for the plant's production. That order then finances the plant itself and thus the production run.

As I've covered here before, there is indeed an opportunity to make sapphire significantly cheaper simply by going through multiple iterations of the manufacturing process.

In effect, the idea is very similar to the way in which silicon ingot has fallen in price from $450/kg to some $25 or so now. Make more ingots at wider girths more often and the production cost of each will come down. It's that combination of increasing expertise and mass manufacturing that does it. We've seen it in silicon and the industry predicts that much the same will happen with sapphire.

So far, so newsy: but of course much the most interesting thing about any piece of news is what it implies for the future. And it's possible to make the speculation that the way Apple is going to use its cash pile is in this manner. It's not quite vertical integration – the actual owning and operation of the plants that supply it – but financing advances in production techniques in those upstream suppliers are certainly something closely akin to it.

We've seen some vertical integration, for sure. Apple now designs its own chips based on the ARM core rather than contracting out that design to Samsung. But it is still contracting out the fabbing of those chips, currently to Samsung and (as rumour has it) to TSMC in the future. True vertical integration would mean that Apple would then build its own fab – but I doubt it will.

We could, however, imagine the iPhone giant co-financing a fab on the next generation of production technology instead. And through its financing, via that purchase order, it takes part in the building of the next generation of sapphire production.

It's not unusual in business to find yourself with a chicken-and-egg situation. You know that if you make the effort you can reduce production costs per unit substantially by upping the size of production. But you're really very unsure as to whether you can actually sell all of the increased production even at that newly lower price that is possible (in technical terms you're not sure what is the elasticity of demand for the product is with respect to price). And it is also possible that there are people out there who would just love to gobble up all you can produce at that beautifully lower price but they don't know that you can in fact do this. We do, after all, live in a world of imperfect information.

Then there are those interesting times when the two can meet: the bloke who knows how to make lots more very cheaply and the bloke who will use lots more if it can be made more cheaply. This is really what the Apple and sapphire story is about. Apple has the financial resources to be able to support GT Advanced Technologies through the construction stage and also the appetite for the material once it is being produced.

Beginner's guide to SSL certificates

Next page: Be your own market

More from The Register

next story
PEAK APPLE: iOS 8 is least popular Cupertino mobile OS in all of HUMAN HISTORY
'Nerd release' finally staggers past 50 per cent adoption
Tim Cook: The classic iPod HAD TO DIE, and this is WHY
Apple, er, couldn’t get parts for HDD models
Apple spent just ONE DOLLAR beefing up the latest iPad Air 2
New iPads look a lot like the old one. There's a reason for that
Google Glassholes are UNDATEABLE – HP exec
You need an emotional connection, says touchy-feely MD... We can do that
Microsoft fitness bands slapped on wrists: All YOUR HEALTH DATA are BELONG TO US
Wearable will deliver 'actionable insights for healthier living'
Lawyers mobilise angry mob against Apple over alleged 2011 Macbook Pro crapness
We suffered 'random bouts of graphical distortion' - fanbois
Caterham Seven 160 review: The Raspberry Pi of motoring
Back to driving's basics with a joyously legal high
Back to the ... drawing board: 'Hoverboard' will disappoint Marty McFly wannabes
Buzzing board (and some future apps) leave a lot to be desired
prev story

Whitepapers

Why and how to choose the right cloud vendor
The benefits of cloud-based storage in your processes. Eliminate onsite, disk-based backup and archiving in favor of cloud-based data protection.
A strategic approach to identity relationship management
ForgeRock commissioned Forrester to evaluate companies’ IAM practices and requirements when it comes to customer-facing scenarios versus employee-facing ones.
Reg Reader Research: SaaS based Email and Office Productivity Tools
Read this Reg reader report which provides advice and guidance for SMBs towards the use of SaaS based email and Office productivity tools.
Saudi Petroleum chooses Tegile storage solution
A storage solution that addresses company growth and performance for business-critical applications of caseware archive and search along with other key operational systems.
Simplify SSL certificate management across the enterprise
Simple steps to take control of SSL across the enterprise, and recommendations for a management platform for full visibility and single-point of control for these Certificates.