MERRIMACK — The multiyear contract GT Advanced Technologies announced last week with Apple Inc. elevates the Merrimack company’s national and international reputation as the maker of iPhones and iPads begins making some of its products in the United States.
GT will supply the sapphire material the company says is virtually scratch-proof, making it ideally suited as a screen material over reinforced glass because it can withstand extreme strike forces.
“We are very excited about this agreement with Apple, as it represents a significant milestone in GT’s long-term diversification strategy,” Tom Gutierrez, president and chief executive officer, said in a statement.
Apple will provide a facility in Arizona in which GT will own and operate its sapphire furnaces and other related equipment, according to the agreement. GT will employ about 700 people to run the manufacturing operation. Apple will provide a prepayment to GT of about $578 million that GT will repay over a five-year period beginning in 2015.
“We are pleased to be creating hundreds of new manufacturing jobs in the U.S., and believe that this agreement is in the long-term best interests of our company, employees and shareholders as it builds a robust materials business with recurring revenues,” Gutierrez said.
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, Calif.-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.
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 5, which has new fingerprint-reading technology, according to IHS.
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 Gov. 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.
According to the company’s 2013 third quarter fiscal report, GT expects the agreement with Apple to be cash positive.
“By leveraging the new materials operation and our enhanced R&D efforts, we will be well-positioned to drive the growth of other sapphire opportunities, including the expansion of our LED and industrial sapphire businesses in partnership with our (advanced sapphire furnaces) customers,” Gutierrez said.
To drive the growth of its new sapphire materials business, GT said it has accelerated the development of its next generation, large-capacity furnace to deliver the sapphire material.
While the deal represents a major coup for GT, it won’t affect its presence in the Granite State.
“The new agreement will not directly impact our operations in New Hampshire,” a company spokesperson said in an email to the New Hampshire Union Leader. “Our facility in Merrimack remains an important center of research and development for the company, as well as our corporate headquarters.”
Bloomberg News contributed to this firstname.lastname@example.org