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Apple Inc. (AAPL) Sticks With Corning Incorporated (GLW) — for Now

There’s been talk this year that the next big thing in smartphones would be the adoption of sapphire displays. It all started in March, when MIT Technology Review published a report on the material, suggesting that the material’s strength could represent a threat to Corning Incorporated (NYSE:GLW) Gorilla Glass. All the signs of a disruptive threat remain, except the cost differential remains large enough that Corning Incorporated (NYSE:GLW) should be safe for now.

Apple Inc. (AAPL)

Apple Inc. (NASDAQ:AAPL) is largely credited with sparking Gorilla Glass adoption after it found a new use for the decades-old material in the iPhone. The iPhone maker currently uses sapphire in the latest iPhone 5, except only as a small camera lens cover. Apple Inc. (NASDAQ:AAPL) is one of the few high-end OEMs that could potentially be willing to pay up for sapphire cover glass to further differentiate the iPhone from the competition. That could potentially spark another shift, except this time, away from Gorilla Glass.

Speaking of high-end OEMs, Vertu CEO Perry Oosting shines some light on the state of sapphire smartphones. The maker of diamond-encrusted smartphones is about as high end as it gets, and has experience putting sapphire (and other precious gems) all over smartphones. In a recent interview with German site Tages-Anzeiger, Oosting mentions that Apple Inc. (NASDAQ:AAPL) had previously hired away several Vertu employees to investigate using sapphire displays.

However, sapphire requires a lot of processing time for production, which makes it difficult to meet Apple Inc. (NASDAQ:AAPL)’s volume needs that easily reach 30 million to 40 million units per quarter. That’s one reason why Apple Inc. (NASDAQ:AAPL) has shelved the idea for the time being and will stick with Gorilla Glass for the foreseeable future.

Nokia Corporation (ADR) (NYSE:NOK) used to own Vertu, but sold off the majority of the company to private equity firm EQT VI last year, while retaining a 10% minority stake.

Corning Incorporated (NYSE:GLW) has also proactively responded to the threat, and has released internal tests that show Gorilla Glass holding up better than sapphire. That’s why the glass maker isn’t scared of sapphire quite yet, and can enjoy its latest cash cow for a little while longer.

The article Apple Sticks With Corning — for Now originally appeared on and is written by Evan Niu, CFA.

Fool contributor Evan Niu, CFA, owns shares of Apple. The Motley Fool recommends Apple and Corning. The Motley Fool owns shares of Apple and Corning.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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