Apple’s Sapphire iPhone Screen “Innovation Adventure”

Process innovation is a challenging “high wire” act. On the positive side: new materials, products and industries can be created. However, if the risks are not managed judiciously, the innovation can fail at great cost. This week’s Process Perspective will examine what “Process Stewardship” lessons can be learned from the effort by Apple and a key supplier to rapidly and dramatically scale-up synthetic sapphire production.

Synthetic sapphire is an extremely hard and durable clear material, which has the potential to create scratch proof iPhone screens, a real product improvement and breakthrough. GT Advanced Technologies (GTAT), a New Hampshire furnace equipment company, landed a lucrative deal in 2013 to supply Apple with synthetic sapphire for the iPhone. The goal was to be production ready in the fall of 2014, in time for the iPhone 6 and iPhone 6 Plus phone releases.

By the fall of 2014 a large factory had been built and staffed in Mesa Arizona. GTAT quickly set out to hire 700 staffers for the Mesa AZ facility. Apple offered to lend GTAT $578 million toward building 2,036 furnaces. Imminent full-scale production of these breakthrough screens was expected.

Unfortunately, production NEVER began because the factory could not reliably deliver product. Apple and GTAT began legal proceedings to apportion blame. The article “How $1 Billion Bet on iPhone Screens failed…” was published in the WSJ on 11/19/14. $1.4 billion in market value for GTAT was wiped out as they filed for bankruptcy. Apple’s losses were significant (even for Apple), probably in excess of $500 million.

I think this is what happened. Apple and GTAT had encouraging results from a limited number of machines. The critical decision to purchase many machines and scale-up to full production was not made deliberately enough, with enough forethought, and with strict (previously agreed to) criteria for how the pilot scale units would have to perform to ensure reliable scale up. This evaluation needs to be done ruthlessly and honestly to avoid premature launch. I’m sure the pressure to proceed to full-scale manufacturing was tremendous. OUCH!

It is possible, and normal, to “babysit” pilot-scale machines and processes, and this can be done by an engineering team. However, it is not possible to babysit 2,036 machines! The process needs to work very reliably, with no “looking under the hood”. It seems as if this key decision point is where the Apple/GTAT effort went off-track.

The MPES Process Stewardship guidelines for these scale-up decision points are:

• Research stakeholders view process development as a coequal activity with equipment development and material selection.

• Honest data-driven assessments of process potential are made early.

• The process is iterated on in conjunction with iterations of equipment.

• Shiny equipment is not confused with a robust process.

This Process Stewardship approach ensures scalability and successful commercialization, and minimizes the risk of commercialization launch failures. Apple/GTAT did not rigorously employ this Process Stewardship approach, at great cost to them in time, effort, and money.

I applaud and respect the efforts made by Apple and GTAT in this project. Without boldness and risk taking, breakthroughs are not made. However, they seem to have room to improve how they minimize and manage their (largely unseen) process risk.

The situation that Apple/GTAT found themselves in is not unique. I have seen it happen even at very seasoned companies who are world-class innovators. This risk can be minimized and managed, but it cannot be eliminated.

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YOUR CHALLENGE THIS WEEK Consider your key research and pilot-scale projects. How will you make the decision to proceed to full-scale manufacturing? What is your track record for these projects? What simple steps can you take to improve the probability of success?

I’d enjoy hearing about your scale-up experiences, challenges, and learnings. As always, you can just hit reply to this email and I’ll get back to you promptly.

All the Best, Marty

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