Cutting Edge Companies: GT Advanced Technologies

By Kenneth Scott, CFA
From the Winter 2011 Edition of Values


While we hear often of the creative and inventive aspects of innovation—whether for an iPad or a robotic exoskeleton—it is worth a reminder that economics often drive an innovation’s market success. Merrimack, N.H.-based GT Advanced Technologies (ticker: GTAT) is a company that drives the increased affordability of two important alternative energy technologies—solar and LED—through the increased efficiency of the equipment it manufactures.

Solar. GT’s photovoltaic (PV) business segment manufactures equipment that produces polysilicon, the principal raw material in solar cells, and casts polycrystalline ingots, which are manufactured into PV wafers. GT is on its fifth generation of products, and efficiency is its main point of distinction among its peers. GT reports its most recent reactor is 50 percent more efficient than previous generation reactors, and GT is developing a reactor to improve energy efficiency by an additional 30 percent. Annually GT produces units with aggregate PV manufacturing capacity close to 1 gigawatt (GW), roughly equivalent to the power consumption of 1 million U.S. households. World solar demand was 16 GW in 2010, up nearly 80 percent over the previous year.

Sapphire/LED. GT also manufactures advanced sapphire crystal growth (ASF) systems that incorporate technology originally developed for its PV business. Sapphire crystals are critical to superior performance of blue and white LED, a technology that relies on electroluminescence to use significantly less energy in lighting and electronic devices. LED light bulbs use 85 percent less energy per watt than incandescent bulbs, and less energy than compact fluorescent lamps (CFLs) as well. LED bulbs reach full brightness instantly (unlike CFLs), have comparable lighting performance (softness or coolness) to incandescent bulbs, and reportedly last 20 years, but generally cost at least $20 per bulb. Thus, continuing to lower the initial cost of LED bulbs is key to improving consumer acceptance. GT entered the sapphire business in 2010, and delivered its first ASF system in May 2011. GT reports its crystal growth systems provide LED makers with sapphire production efficiency benefits of 30 percent relative to peers. GT is enabling larger sapphire wafer sizes (currently 6˝) with its next generation (8˝) in development.

GT is the market leader in equipment to make inputs for solar wafers and LEDs, and has on average nearly doubled its revenues each year since 2004. While this growth rate will inevitably taper off, and GT is unlikely to make headlines, its customers depend on the firm to manufacture ever-more efficient equipment to lower manufacturing costs, so that all may experience the benefits of solar PV and LED.

This information should not be considered investment advice or a recommendation to buy or sell any particular security.