Apple Confirms Next U.S. factory is set for Arizona
05 Nov, 2013
Statement about the project from Barry Broome, president and CEO, Greater Phoenix Economic Development Council:
“Apple’s presence in the region will be a game-changer for the Greater Phoenix area, its innovation landscape and future ability to attract other high-tech companies. Between their plans to hire 700 direct employees and run completely on renewable energy, I’m convinced Apple could not have chosen a better location than Mesa and Eastmark. This deal is the result of the cooperation and support of several parties, including Maricopa County Supervisor Steve Chucri, City of Mesa Mayor Scott Smith, DMB Associates, the ACA and SRP, whose infrastructure will enable more projects to move forward in the surrounding area.”
A company that will make small pieces of high-tech glass for Apple products plans to employ about 700 people at the now-vacant First Solar Inc. factory in east Mesa.
This is the first significant Arizona presence for Apple Inc., which is buying the building for its supplier, GT Advanced Technologies Inc. Apple looked closely at the Phoenix area about two years ago before deciding to award a much larger facility to Austin.
The deal, which was announced by GT in a regulatory filing Monday afternoon, is seen as a coup for Arizona, drawing excitement and praise from Gov. Jan Brewer, Mesa Mayor Scott Smith and a variety of economic-development officials.
The project also will create 1,300 construction-related jobs to get the facility ready for production, Brewer said in a statement.
“Apple is indisputably one of the world’s most innovative companies and I’m thrilled to welcome them to Arizona,” her statement said.
Apple confirmed the deal but shared few details.
The Arizona Commerce Authority, which Brewer chairs, Salt River Project, the Greater Phoenix Economic Council, Mesa and Maricopa County worked to bring the factory to Mesa.
It is still unclear what incentives, if any, they used to seal the deal with the technology giant.
“Apple will have an incredibly positive economic impact for Arizona, and its decision to locate here speaks volumes about the friendly, pro-business climate we have been creating these past four years,” Brewer said in her statement.
The factory will be run by GT, a New Hampshire-based company that will supply specialty sapphire glass for some of Apple’s tech products.
Apple will buy the building and lease it to GT. GT said in its regulatory filing that it expected sapphire-glass production to start bringing in significant revenue in 2014.
The sapphire glass that GT will make in the facility will be used to cover the camera lenses in Apple’s phones and the fingerprint-reading devices in its latest products. GT’s technology also can be used to make scratchproof glass covers for smartphones, although it is not used for that purpose by Apple today.
“We are very excited about this agreement with Apple as it represents a significant milestone in GT’s long-term diversification strategy,” said Tom Gutierrez, GT’s president and CEO.
The Arizona factory is a departure from GT’s usual business, which is selling the equipment for sapphire-glass production. Supplying Apple with sapphire glass represents a more steady line of business than equipment manufacturing, the company said.
GT has lost about $45 million this year.
Apple prepaid for $578 million of GT’s sapphire-glass goods, which GT must repay over five years ending in 2020, either as credit against Apple’s purchases or as cash, GT said in its regulatory filings.
Arnold Maltz, supply-chain-management professor at Arizona State University’s W. P. Carey School of Business, said it is unclear why Apple wants the production capacity in Mesa, but he had several ideas.
Maltz said it is possible that the material made in Mesa could go to another factory nearby in Juarez, Mexico, run by Foxconn Technology Group, another Apple supplier.
“I would not be surprised if a lot of this output doesn’t go to Juarez,” he said. “Foxconn has a monster plant there, and my guess is their client is Apple.”
He also said it is possible either Apple or GT executives wanted to keep sapphire-glass production in the U.S.
The majority of Apple products are manufactured in China, a fact that has put the company under considerable scrutiny. At its October launch event, Apple disclosed it was assembling its specialty Mac Pro computers in the U.S.
The building also comes at a steep discount price, with First Solar announcing it is taking a $56 million loss on the sale.
Apple courted the Phoenix area, at least superficially, before deciding in early 2012 to build a massive operations center in Austin, where it will spend $282 million in the next decade on a 39-acre campus.
The Austin-American Statesman reported that project will receive an estimated $35 million in state and local tax incentives. The campus is projected to house 3,600 new workers with an average wage of $54,000 in the first year, growing to an average wage of $73,500 in a decade.
The Arizona Commerce Authority and other government agencies can provide tax incentives in Arizona. About $51.5 million was offered to First Solar to build a factory at the site before its plans changed.
Brewer and other economic-development officials declined to detail any such offers Monday. The Arizona Commerce Authority has made a “competes” incentive offer, senior vice president Nicole McTheny said, but the details are not final.
“Apple’s presence in the region will be a game-changer for the Greater Phoenix area, its innovation landscape and future ability to attract other high-tech companies,” Greater Phoenix Economic Council President/CEO Barry Broome said in a statement Monday.
In February 2012, Broome got a call from Apple asking for a presentation at their California headquarters in three days. Broome said he and Don Cardon, then the CEO of the Arizona Commerce Authority, were given an hour to pitch the region, and signed confidentiality agreements promising not to reveal the name of the company.
Some Arizona officials expressed frustration at the time that they didn’t get more of a chance to compete for the operations center, but Apple officials seemed impressed with the region nonetheless.
“We are in the game, and when you are in the game, opportunities will continue to come, and you will get better at the game,” Mesa Mayor Scott Smith said in 2012.
On Monday, Smith said the participation in that earlier site-selection round paid off in landing the current facility.
“We hope this is the first of many facilities,” Smith said. “We’d love it if they had great success here and found a reason to build more here.”
Mesa city officials, who had signed confidentiality agreements with Apple, referred to the current project internally as “Operation Cascade.”
Scott Somers, who represents southeast Mesa on the City Council, said it’s likely the Apple factory will spawn spinoff businesses in the neighborhood, and that Mesa needs to be careful about the zoning on nearby properties to take full advantage of those opportunities.
First Solar pullback
First Solar never occupied its factory because it scaled back its global expansion plans last year.
The world market for solar panels was flooded by oversupply, which caused prices to drop. The glut occurred just as some of the major markets in Europe were cutting subsidies for solar panels and decreasing demand for panels.
First Solar was one of the largest producers in the world at the time, and while it weathered the crisis, it had to restructure to remain in business.
In May 2012, First Solar announced 2,000 layoffs, or 30 percent of its global workforce.
At the time of the pullback, the Mesa facility was nearly complete, but it was clear First Solar did not have the demand for its panels to need the additional factory space.
In October 2012, the company disclosed it was seeking a tenant for the facility.
Last month, First Solar announced it had a deal to sell the building, but did not disclose the buyer.
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