Apple Ends Supply Deal: Coherent UK Factory at Risk

Following the termination of a lucrative supply agreement by Apple Inc., a prominent UK wafer factory confronts the prospect of either being sold or shuttered.

Situated in County Durham, northern England, this factory is owned by Coherent Corp., a leading company specializing in materials, networking, and laser technology, headquartered in Saxony, Pennsylvania. Local management has indicated that a strategic evaluation is underway, potentially resulting in the sale of the wafer factory. The company has announced the issuance of final purchase notices to other clients.

In an official statement, the company lamented, "Regrettably, the cessation of supplies to a key client at the close of the 2023 fiscal year has raised concerns about the ongoing viability of this operation. We are presently conducting a strategic review of the business, exploring options such as the adoption of innovative technologies and/or the divestment of the business."

It has been reported that the factory predominantly supplied components for Apple's Face ID recognition system utilized in iPhones. However, with anticipated alterations in the upcoming generation of iPhones, Apple has suspended its orders. A year earlier, over 100 employees were laid off after the factory was informed of Apple's intention to cease orders. Despite this, 257 employees remain to fulfill existing contracts.

This development marks a significant setback for the UK semiconductor industry, which has been experiencing a gradual reduction in scale as global manufacturing shifts towards Asia.

Since its inauguration by Queen Elizabeth in 1991, the UK wafer factory under Coherent Corp.'s ownership has been operational under various ownerships. In 2021, the company announced a substantial expansion of the factory, reportedly linked to securing the Apple contract. Annual financial reports until June 2023 showcased a revenue surge from £13.3 million to £104.5 million with the implementation of the supply agreement.

Apple's Face ID system, incorporating a range of sensors and cameras for unlocking phones, verifying payments, and enhancing photographic and augmented reality experiences, is slated for a comprehensive revamp in the forthcoming generation of devices, expected to launch later this year. Reports suggest the adoption of a smaller module to be integrated beneath the screen.

The severance of contracts with Apple typically yields dire consequences for suppliers. UK semiconductor company Imagination Technologies experienced a 50% reduction in market value and eventual acquisition after Apple's announcement in 2017 of its discontinuation of the utilization of the company's graphics chip designs.