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GT Advanced Technologies (GTAT) Unlikely in iPhone 6L; Rosenblatt Comments on Apple's (AAPL) Sept. Event

September 4, 2014 2:09 PM EDT
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Rosenblatt Securities is commenting on Apple (Nasdaq: AAPL) ahead of the company's September 9th event.

Analyst Brian Blair sees Apple's event signalling three key trends:

1) A Payment Platform that leverages the 700+ million iTunes accounts and utilizes Apple’s TouchID biometric authentication, as well as NFC.

2) A Wearable that combines key features from the various smartwatches on the market (Pebble/Galaxy/Fuelband/Fitbit) into a single device, leapfrogging existing products on the market much as the iPod did in the burgeoning MP3 player market in 2001. Blair is looking for an initial build of 12 to 15 million units. The analyst commented, It's worth noting that no one has seen the iWatch (or whatever Apple will call it), which we think is by design. We don't believe China's Quanta will begin production of the wearable until early October. We still believe delivery will commence this calendar year, not in 2015.

Other expectations of the Apple smartwatch include:

  1. Functionality - We believe Apple will showcase their wearable as a new platform where developers will be able to write custom applications, as we have seen in other Apple products. iOS 8 integration is assumed. Health kit functionality is also a given, but it's unclear yet what this means to consumers, though this feels like the clearest potential for differentiation from other products on the market.

  2. Form Factor - We see three options here: a round face, a square face or a curved wrap-around screen. As we have said previously, we expect a round screen.

  3. Pricing - Blair thinks anything over $400 could be a tough sell. He does see a premium to competitors, where prices have been hovering around $300.

3) Large Screen iPhones that will help Apple grow market share globally, particularly in Asia where large screened smartphones hold the bulk of the market share (and where Apple’s share has remained fairly low as a result).

Blair comments, We believe investor uncertainty still exists however, regarding iPhone unit production for 2H/CYQ4 and certain component supplier confirmations. Combining these two areas of uncertainty should create continued opportunities for new Apple suppliers like InvenSense (Nasdaq: INVN), who we have believed for some time to be the sole supplier of the 6-axis gyroscope for the iPhone 6 and the iWatch, and NXP (Nasdaq: NXPI), who we expect will be supplying the iPhone 6 with NFC (near field communications.

Blair is looking for 4.7- and 5.5-inch versions of the iPhone. The analyst's December-quarter production expectation on the 4.7-inch device is 50 to 60 million units and for the 5.5-inch model it is at 13 million units.

Notably, Blair doesn't see GT Advanced Technologies (Nasdaq: GTAT) being used in the larger device. He comments, We believe the larger screen iPhone 6L (5.5 inch) had initially intended to use sapphire glass from GT Advanced (GTAT), but believe this 6L will now use Gorilla Glass. (We do expect the iWatch to utilize sapphire glass from GT Advanced, however.) We understand this larger model has also seen low yield rates on the touch panel and Apple has also trimmed unit production.



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