Nearly a year ago, Apple’s sapphire supplier GT Advanced Tech announced that it was filing for bankruptcy under Chapter 11, with the company parting ways with Apple as part of the restructuring. Today, The Wall Street Journal reports that GT Advanced Tech will be reducing its workforce by another 40 percent in an effort to further cut costs.
Following the October surprise bankruptcy filed by GT Advanced Technologies—a key sapphire supplier for the iPhone—Apple today announced plans to invest $2 billion over the next 30 years in the failed plant. The Mesa, Arizona-located plant will become the central command center for its various data centers around the globe.
“We’re proud to continue investing in the U.S. with a new data center in Arizona, which will serve as a command center for our global networks,” Kristin Huguet, a spokeswoman for Cupertino, California-based Apple, wrote in an e-mailed statement on Monday. “This multibillion-dollar project is one of the largest investments we’ve ever made.”
Shortly after the bankruptcy announcement from GT Advanced Technologies, Apple described the decision as surprising while adding that the company would focus on job preservation.
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The Wall Street Journal reported today that Apple and GT Advanced Technologies have reached a settlement in their ongoing bankruptcy case. The settlement, which was approved by the courts earlier today, gives the sapphire supplier up to four years to sell its current stock of sapphire production equipment in order to repay Apple.
The two companies previously went head-to-head over who should be considered responsible for the complete failure of the partnership, with GT blaming Apple for making demands the company couldn’t meet while blocking any other contracts GT may have wanted to accept. Apple, on the other hand, blames GT for accepting a contract and then failing to provide the agreed-upon product.
As Apple and would-be sapphire supplier GT Advanced Technologies come closer to a settlement following the latter’s recent bankruptcy announcement, GT’s creditors will get to take a look under the wraps of the secretive Cupertino tech giant.
As noted earlier today by the Wall Street Journal, Apple will provide GT’s creditors with documents regarding the companies’ arrangement in response to inquiries attempting to determine whether the proposed settlement is fair, or whether Apple is trying to take advantage of the situation.
Photo via WSJ
The Wall Street Journal has revealed key details of the failed deal between Apple and sapphire supplier GT Advanced Technologies that show why the agreement collapsed and how GT managed to run itself into bankruptcy while trying to meet Apple’s standards.
A previous report from the Journal revealed that GTAT had been unable to provide the iPhone 6 displays it had promised Apple, but now we have even more information on why that demand was so hard to meet.
In the aftermath of GT Advanced filing for Chapter 11 bankruptcy protection, the sapphire maker reached a $439 million settlement with Apple in which the supplier will repay the iPhone maker up to $290,000 per furnace sold. GT Advanced creditors aren’t happy with the proposed settlement, however, arguing that the sapphire company may have received too little in the deal.
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Following a court order that documents be unsealed regarding the ill-fated partnership between Apple and sapphire crystal glass maker GT Advanced, a number of interesting anecdotes surrounding the tumultuous relationship have been exposed. In an unedited affidavit, GT Advanced COO Daniel Squiller claimed that Apple used a classic “bait-and-switch” strategy to secure its deal with the now-bankrupt supplier.
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GT Advanced disclosed on Thursday that the U.S. Securities and Exchange Commission is seeking information about the sapphire glass maker’s trading activity since January 2013 after it filed for Chapter 11 bankruptcy last month. GT Advanced’s latest Form 8-K report claims that the company is fully cooperating with the SEC during its investigation.
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GT Advanced announced this afternoon that it has reached an amended settlement agreement with Apple related to the sapphire crystal glass manufacturer’s recent bankruptcy filing, in which both parties have agreed to waive the condition that GT Advanced’s declaration on October 8th remain under seal and expunged. Meanwhile, GT Advanced has filed a Form 8-K with the U.S. Securities and Exchange Commission that provides further details about the recent fallout between Apple and GT Advanced.
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While lawyers for bankrupt sapphire supplier GT Advanced confirmed previously that it had reached an agreement to repay Apple approximately $439 million, many details regarding what exactly went wrong in the partnership had not been disclosed publicly. Today we get what might be the clearest explanation yet of what happened between the two companies leading up to GTAT filing for Chapter 11 bankruptcy last month. In a declaration filed by COO of GT Advanced Daniel Squiller with the courts yesterday (via Fortune), the company outlines previously sealed info regarding its deal with Apple and terms of the deal that lead to GT’s bankruptcy filing.
When GTAT initially entered into negotiations to sell sapphire furnaces to Apple, it had no sense that, having borrowed hundreds of millions of dollars to pay for the components of more than 2,036 sapphire furnaces, it would end up being unable to meet its cost and production targets for reasons that it believes were beyond its control as well as unforeseen difficulties in scaling its technology to 262kg boules to meet evolving product specifications.
While noting that the deal was “an ambitious transaction for the production of sapphire in quantities, size and quality never before achieved,” the document reveals a number of strict terms Apple imposed in the deal that the company describes as limiting its ability to achieve Apple’s requirements for sapphire production. Here’s a few of the more interesting bits:
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Apple’s clean-break settlement with GT Advanced is now official, two days after lawyers for the bankrupt sapphire manufacturer reported that agreement had been reached. In a press release, the company said that the company was being given up to four years interest-free to repay the $439M owed to Apple.
GT will be released from all exclusivity obligations under its various agreements with Apple. GT will retain ownership of all production, ancillary and inventory assets located in Mesa and Apple is provided with a mechanism for recovering its $439 million pre-payment made to GT over a period of up to four years without interest, solely from a portion of the proceeds from ASF® sales. The agreement provides for a mutual release of any and all claims by both parties. As a result of the agreed upon terms, GT retains control of its intellectual property and will be able to sell its sapphire growth and fabrication technology, including ASF and Hyperion™, without restrictions.
The company is exiting the sapphire production business and will repay Apple from the proceeds of selling its furnaces, the four-year timeframe likely agreed in order to allow GT Advanced to achieve the best price.
GTAT said that it will continue “technical exchange” with Apple to help develop future production processes, but will limit its future involvement in sapphire to making production equipment for other companies.
Apple’s bankrupt former sapphire supplier is seeking to shut down its Mesa, Arizona plant and has informed 727 employees that they will be laid off between today and December 15th, according to AZ Central. The breakdown of the jobs being cut includes:
…524 production workers, 108 technical positions, 70 management jobs and 25 administrative jobs, according to the notice signed by Linda Luman, vice president of human resources for GT.
Apple is seeking to keep its involvement in GT Advanced’s Chapter 11 bankruptcy filing secret as it reportedly asked courts to file its objections in the case under seal. Bloomberg reports that Apple has requested permission to keep its comments in the case secret to avoid disclosing “confidential research, development, or commercial information regarding Apple’s business processes.”
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Not much is known about Apple’s deals with its suppliers, but court filings by former sapphire supplier GT Advanced reveal that the contract included a $50M penalty for any leak of Apple product information, reports the Financial Times.
While the amount of the penalty clause may vary according to the size of the supplier, it seems likely that a substantial leak penalty is a standard condition of supplying product components to Apple – though the number of leaks over the iPhone 6 suggests that such penalties offer limited protection.
Contracts between Apple and its suppliers will undoubtedly be subject to strict non-disclosure agreements, but lawyers for GT Advanced are asking the court to allow details to be made public …
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The motion GT Advanced filed earlier for a closed hearing was to seek court permission to close its sapphire manufacturing plant, reports Re/code.
Sapphire crystal maker GT Advanced Technologies, which filed for Chapter 11 bankruptcy protection earlier this week, has asked the court’s permission to “wind down” operations at its manufacturing plant, less than a year after announcing a high-profile deal to supply the material to Apple.
As we noted earlier, the reason for the company’s failure appears to be that it was unable to meet Apple’s requirements for sapphire displays for the iPhone 6, though it remains unclear whether this was a quality issue or an inability to supply the volumes needed.
The court will hear the company’s motion on 15th October.
KGI stated earlier this week that the bankruptcy of GT Advanced is unlikely to have any impact on the Apple Watch as there are other suppliers able to provide sapphire screens in the sizes needed, but it may be that Apple will rethink its plans to use sapphire for future iPhones.
Image credit: azcentral.com
The Wall Street Journal has published new information about the breakdown of a deal between Apple and GT Advanced Technologies Inc. that led the latter to file for bankruptcy earlier this week. As was previously noted, Apple withheld a $139 million payment from the sapphire supplier, though the exact reasoning was unclear.
In a research note released yesterday, KGI confirmed that GTAT was Apple’s first choice for these displays because the company had created a process that provided superior drop test results. Now the Journal reports that the payment was withheld after GT Advanced failed to meet Apple’s requirements for the iPhone 6 display.
KGI has published a new report clarifying that the recent announcement that Apple’s sapphire supplier had filed for bankruptcy will likely have no impact on the production of the comapny’s sapphire display-equipped wearable. According to KGI, GT was mainly contracted to create the sapphire crystal displays for the iPhone 6 and 6 Plus.
The reason Apple partnered with GT Advanced on the iPhone displays was related to the size of the screens. Because GT was the best equipped to manufacture a display the size of the new iPhone models. However, because the Apple Watch uses a smaller display, other companies are able to produce the covers as easily as GT. This is also why the Touch ID sensor and iPhone cameras, which both use a sapphire lens, will also be unaffected.
Apple’s sapphire processing plant in Mesa, AZ
The Wall Street Journal has cast some more light on recent reports that Apple’s sapphire supplier had declared bankruptcy earlier this week. According to the Journal’s report, Apple withheld a payment of $139 million from GT Advanced, though currently there’s no indication of why this decision was made.
In another interesting revelation, the Journal also discovered that the CEO of GT Advanced, Thomas Gutierrez, unloaded all of his stock in the company in a sale just one day before the iPhone 6 was unveiled. The device was widely expected to use sapphire supplied by GT for its displays. GT Advanced had enjoyed a rising stock price that had nearly doubled since initial rumors of a collaboration on the iPhone 6 started swirling.
Apple and State of Arizona filings have come to light today that indicate Apple is rapidly expanding its Mesa, Arizona operations and GT-Advanced sapphire crystal production. PTT Research Senior Analyst and GTAT investor Matt Margolis shared the new documents from his latest research with 9to5Mac. The first interesting piece of the filings is a letter from Apple’s Director of Global Trade Compliance James J. Patton from early July to the U.S Department of Commerce:
GT Advanced Technology has given an update on the status of its contract to supply Apple with sapphire displays for the upcoming iPhone 6 displays. According to the information provided with the company’s Q1 2014 financial report, Apple has already made three of four payments to GT Advanced for the sapphire, and GT notes that so far it is on track to meet demand.
Apple struck a deal with GTA last year to manufacture the sapphire displays that are expected to appear in the next-generation iPhone at a new plant in Mesa, Arizona. Earlier this year the plant was outfitted with enough sapphire crystal furnaces to create an estimated 100-200 million displays. At the end of April, Apple started sending its first shipments of sapphire to China, where the new iPhone models will be manufactured. These displays are expected to make their debut in the fall of this year along with two new iPhone models, each sporting a different size sapphire screen.
Apple’s new sapphire crystal component producer GT-Advanced announced its Q4 2013 earnings results yesterday, and in addition to talking about the past quarter, the company shared some details about its future and its well-publicized partnership with Apple.
We previously indicated, based on research into publicly available shipping documents, that we expect Apple and GT-Advanced to be developing sapphire crystal displays for a future iPhone model. The companies are likely to be able to produce over 100 million displays this year…
If you were wondering why Apple chose Mesa, Arizona, as the location of its latest manufacturing plant in the U.S., a story today from Bloomberg explains that Apple, not shy about going after tax breaks, has taken advantage of many perks put in place by the suburb’s mayor:
So last year, when Apple was searching for a place to house a factory that makes a stronger glass for its gadgets, Mesa pulled out the stops. The city, which was ravaged by the 2007 housing crash, offered tax breaks, built power lines, fast-tracked building permits and got the state to declare a vacant 1.3 million-square-foot facility that Apple was exploring a foreign trade zone. With unemployment high, such are the lengths that towns are willing to go to to lure the world’s most valuable company.“Any time you have a company like Apple come in and invest in your area, especially with this type of operation, it’s significant,” said Smith, who triumphed late last year when Apple spent $114 million to buy the factory. The mayor celebrated by placing bowls of green and red apples in City Hall.
Smith added that original preparations were done before the city even knew it was Apple, but later Apple requested additional perks before moving in and even got construction permits expedited. Among the other advantages of choosing Mesa for Apple was a $10 million building grant from the Arizona Commerce Authority and an agreement with the city’s power company to build solar and geothermal installations and a new power substation for the plant:
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Last year, Apple and GT Advanced struck a deal to open and operate a manufacturing facility in Mesa, Arizona related to sapphire crystal components.
Earlier this year, we learned that Apple is “aggressively” pushing to make the facility operational by February 2014 and that the building would produce a “critical” and “new” sub-component for future Apple devices. Due to the vagueness and secrecy surrounding Apple and GT Advanced’s plans, there has been little to no confirmation regarding what exactly the partnership will yield for future Apple products.
But, thanks to new documents and information that we have uncovered with help of analyst Matt Margolis, we have a clearer picture of Apple’s plans…
