mesa

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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Following news this week that Apple had reached at a settlement with bankrupt sapphire manufacturer GT Advanced, today the company has responded to the situation in a comment to Recode. While GT previously said it would wind down sapphire production operations at its Mesa, Arizona plant and sell furnaces to repay the $439M owed to Apple, today Apple hinted it might have its own plans for the facility.
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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:

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Apple is preparing to release not one, but two new versions of the iPhone in September, according to the South China Morning Post. Each version will ship with a larger display than the iPhone 5s, coming in at a whopping 4.7″ and 5.5″, respectively. The displays are said to have a pixel density of 441ppi, much higher than the current 326ppi found in the iPhone 5 and later.

The report also states that both displays will be made from sapphire crystal, which fits with recent reports that Apple is planning to have its latest sapphire plant in Mesa, AZ operational in February for a “critical” product component. The displays will also be flat, not curved, the Post says.

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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…

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Back in November, the State of Arizona announced that Apple had chosen the city of Mesa to create a new manufacturing facility and in the process 700 new permanent manufacturing jobs. Some had speculated it could be part of CEO Tim Cook’s plan to bring manufacturing of Macs back to the US (Cook previously stated some parts will come from Arizona), but a supplier later revealed it would be providing equipment for the production of sapphire material at Apple’s new plant. Apple never confirmed what the plant would actually be used for, but we’ve discovered through a new job listing that Apple will indeed use the facility for manufacturing iPhone and iPod components.
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The State of Arizona today announced that Apple is planning to build a new manufacturing facility in the city of Mesa, Arizona. The facility will create 700 jobs for manufacturing, and an additional 1,300 jobs for the construction and management of the new facility, In total, Apple will be bringing at least 2,000 new jobs to the United States thanks to this new facility.

In addition to the manufacturing facility, Apple will be constructing a new solar power grid in the city to power the manufacturing operations, according to Arizona’s announcement:

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