Bloomberg News

Apple Opening Arizona Plant With 2,000 Workers to Make Parts (1)

November 05, 2013

Apple Inc. (AAPL:US) said it’s opening a new plant in Mesa, Arizona, that will create 2,000 jobs to make components for its products, part of a push by the world’s most valuable company to boost manufacturing in the U.S.

Apple struck a deal to pay $578 million to GT Advanced Technologies Inc. (GTAT:US) to supply equipment for the facility, GT Advanced said in a statement yesterday. The machines make materials out of sapphire, which is increasingly used in smartphones to cover camera lenses and home buttons.

After years of outsourcing much of its manufacturing to Asian suppliers such as Foxconn Technology Group and facing criticism from labor groups and politicians for the practice, Apple Chief Executive Officer Tim Cook has made adding jobs in the U.S. a priority. The Cupertino, California-based company will next month release a new Mac Pro that is being assembled in the U.S.

“We are proud to expand our domestic manufacturing initiative with a new facility in Arizona, creating more than 2,000 jobs in engineering, manufacturing and construction,” said Kristin Huguet, a spokeswoman for Apple. “This new plant will make components for Apple products and it will run on 100 percent renewable energy from day one.”

Apple didn’t specify what products will be made at the plant. Taiwan-based Foxconn is the world’s largest contract manufacturer of electronics.

Multiyear Agreement

GT Advanced, based in Merrimack, New Hampshire, said it has entered into a multiyear agreement with Apple to provide furnaces used to make sapphire material. Apple is prepaying the company $578 million, which GT Advanced said it will reimburse over five years starting in 2015. Under terms of the deal, Apple will receive some exclusivity rights from GT Advanced.

GT Advanced’s shares rose as much as 22 percent to $10.24 in extended trading following the announcement yesterday, after closing at $8.38 in New York. Apple rose (AAPL:US) 1.3 percent to $526.75, paring this year’s decline to 1 percent.

“We are very excited about this agreement with Apple as it represents a significant milestone in GT’s long term diversification strategy,” Tom Gutierrez, GT Advanced’s president and CEO, said in a statement issued with the company’s third-quarter financial results.

Demand for sapphire materials has surged since Apple started using it as a camera-lens cover in 2012, according to a report last month from market research firm IHS. The material also is used for the home button of the iPhone 5s that has new fingerprint-reading technology, according to IHS.

Sapphire Usage

Earlier this year, Apple applied for a patent for using sapphire to create sturdier displays.

“Sapphire substrates are suitable for covering lenses, buttons and displays because they are transparent, yet more scratch-resistant than glass,” IHS said. “Glass can become scratched from contact with hard objects, which can degrade the performance of a camera lens or a fingerprint recognition window.”

Apple has a history of spending heavily to buy up supplies of critical components. In 2005, it paid $1.25 billion for flash memory for iPod music players.

Arizona Governor Jan Brewer said the Apple facility would create at least 700 jobs, as well as 1,300 construction and associated positions in the state.

“Apple is indisputably one of the world’s most innovative companies and I’m thrilled to welcome them to Arizona,” Brewer said in a statement.

To contact the reporter on this story: Adam Satariano in San Francisco at asatariano1@bloomberg.net

To contact the editor responsible for this story: Pui-Wing Tam at ptam13@bloomberg.net


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Companies Mentioned

  • AAPL
    (Apple Inc)
    • $524.94 USD
    • 5.93
    • 1.13%
  • GTAT
    (GT Advanced Technologies Inc)
    • $16.17 USD
    • -0.17
    • -1.05%
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