GT Advanced bankruptcy will not affect Apple Watch production, but brings iPhone into question

In a research note obtained by AppleInsider, KGI analyst Ming-Chi Kuo said GT's bankruptcy filing will have little impact on Apple Watch manufacturing, but the development may affect future iPhones as Apple's main investment in the supplier was for iPhone touch panels.

Kuo notes that increasingly large iPhone screen sizes require a 6-inch sapphire ingot. Apple is said to prefer sapphire coming out of GT's advanced sapphire furnace (ASF) due to its resilience and superior drop test performance compared to material from other suppliers. As such, the company is unlikely to use sapphire from suppliers outside of GT Advanced for future projects, Kuo says.

"While GTAT's ASF sapphire isn't the only sapphire ingot source for iPhone sapphire cover lens that is being tested by Apple, we don't think Apple will turn to other suppliers given the notionally superior drop-test performance of GTAT's sapphire ingot," Kuo writes. "We believe Apple is still very interested in using sapphire as a material for iPhone cover lens."

The analyst warns that GT's bankruptcy mean ASF sapphire is facing technology bottlenecks in production, which raises uncertainty as to its use in future iPhone models.

Kuo sees a better outlook for the Apple Watch, however. As the device's screen is much smaller than that of an iPhone, drop test requirements are less stringent, so ingot manufacturing processes from other suppliers will likely suffice. Aside from GT Advanced, Apple may source sapphire from Hansol and Harbin Aurora Optoelectronics, which use less advanced sapphire growing processes.

Despite a huge $440 million investment from Apple, GT Advanced filed for bankruptcy on Monday. It was later reported that Apple withheld a $139 million payment for unknown reasons. It has been speculated that the move was triggered by GT's low cash on hand, which fell to well below a $125 million threshold that contractually allowed Apple to recoup the upfront investment.