Non substrate applications account for 25% of the US$1 billion sapphire industry,” says Yole Développement

Display cover applications could more than triple the size of the industry within the next 5 years.



Established applications could generate US$366 million in 2018. But adoption of sapphire for smartphone display covers could generate an additional $1.3 to $2.6 billion depending on the adoption scenario.



Sapphire is currently used in some exotic, luxury phones. However the sapphire price reduction combined with the massive adoption of touch screen in smartphones have stimulated the interest of cell phone OEMS for this material. Crystal growth equipment manufacturer GTAT is leading the charge and recently created a lot of buzz around this application and on the OEM front. Apple is rumored to have conducted an extended due diligence.



Adoption of sapphire in mobile display covers represents the single largest opportunity discussed in

this report. It remains, however, uncertain. Yole Développement sees 4 major challenges: technology, Yole Développement – Le Quartz – 75 cours Emile Zola – 69100 Lyon-Villeurbanne - Francesupply chain, cost and market acceptance. Crystal growth and finishing technologies still need to be optimized in order to guarantee stable performance and reduce the price gap with chemically strengthened glass like Corning’s Gorilla. Yole Développement’s analyst estimates that the current cost of manufacturing a sapphire display cover is around $22 but could drop to $12 and ultimately below $10. It remains to be seen if the Bill Of Material increase vs. the $3 glass display cover will be absorbed by the OEM in exchange for increased market share or if the consumer will value the increased durability brought in by the sapphire cover and accept paying a premium.



It is difficult to predict the success of sapphire in this application. However, Yole Développement

expects that some OEMs will probe the market and introduce some models featuring sapphire by late 2013 - early 2014. Initial customer reaction will have a strong influence on the future of the

technology. If successful, strong market traction could ease the funding for the more than $1.5 billion in capex needed to serve this industry and set up the supply chain to serve this application.



Glass cover lens manufacturers might seize the opportunity. Because of their vast existing glass

finishing capacity that could be converted to process sapphire and their privileged access to leading

smartphone OEMs, those companies could beat established sapphire finishing companies into this

market. However, another scenario would see collaborations between some leading sapphire and

cover lens makers in order to pool technical knowledge, capacity and customer access under the push of some smartphone OEMs.



In any case, if this opportunity materializes, it will transform the sapphire industry with new players

emerging, and overall production capacity increasing by a factor of more than 7x.



Defense semiconductor and other applications represent 25% of the sapphire industry revenue “These applications will bring in revenue of $240 M in 2013 and, excluding the display cover opportunity, will increase at a 9% CAGR to US$366 million in 2018. Watch windows are currently the

single largest application with revenue of US$120 million in 2012. Most applications are fairly mature

with relatively low growth opportunity with the exception of the emerging mobile device camera lens cover and the aerospace market, driven by the F-35 jet fighter program and the emergence of sapphire based transparent armors,” explains Eric Virey, Senior Analyst, Compound Semiconductors, at Yole Développement.



Most applications have their own “eco-systems” with preferred material vendors, finishing

companies, growth technologies and barrier of entrance. The defense market for example is

characterized by strong technical barriers in both growth and finishing, combined with export

restrictions and national preferences. The semiconductor market is also fairly concentrated with two companies, Saint-Gobain Crystals and Gavish which both hold the bulk of the market due to their technology for growing the large sapphire tubes used in many plasma tools. However, competition is increasing on simpler parts like viewports and lift pins.



Industry transformation could open the door for new applications

Driven by the promise of large volumes for the LED industry, sapphire crystal growth and

manufacturing capacity has increased by more than 8x in the last 5 years. In just the last two years, more than 80 companies have announced their intention to enter the industry, bringing the potential number of players to 130+ with more than 50 of these potential new entrants located in China.



The entrance of aggressive new players with large idle capacity is likely to challenge established

players in many applications. Yole Développement expects those players to initially enter domestic

and international markets with low barrier of entrance and later expand their reach as their

technology matures.



Excess capacity and increased competition have created a challenging environment for sapphire

makers. However, they also drove prices down dramatically and stimulated technology improvements to further reduce cost and improve capability (crystal sizes, shapes …). Yole Développement expects that ultimately, this will be favorable for the industry: lower price and

improved crystal growth and finishing capabilities will open the door to a large gamut of new applications where sapphire has been considered for its performance but never adopted because of

its cost.