When GT Advanced Technologies announced that they would be filing for bankruptcy, many were shocked as it seemed that they were doing well in their partnership with Apple. Well thanks to the new agreement that the company made with Apple, they have finally managed to reveal just what went wrong.
According to the court filing, it seems that the initial deal Apple and GT made with each other would see Apple buy 2,600 sapphire furnaces and other equipment that GT would then use to help Apple manufacture the material. However after negotiation, it was changed to Apple loaning GT $578 million which the company would use to buy said furnaces and equipment.
This basically put GT in a riskier position compared to if Apple had bought the furnaces themselves, and here’s when things went downhill. “GTAT ended up bearing the costs of more than 1,300 temporary and permanent personnel, utilities, insurance, repairs, and raw materials with minimal revenue output. The total cost incurred by GTAT pursuant to the project with Apple has so far amounted to approximately $900 million” (of which $439 million was funded by the Apple prepayment).”
This is also where the “oppressive and burdensome” comment comes in. According to GT’s COO Daniel Squiller, not only was the company expected to churn out as much sapphire boules as possible, there was no guarantee that Apple would buy them. They were also not allowed to sell the sapphire unbought by Apple to other companies, loan or sell their furnaces, both of which would incur fines, and there was also a fine if GT was late in delivering the sapphire boules to Apple, which Apple had the right to cancel a purchase if they see fit.
There was also the issue regarding the price of sapphire which had fallen. The company was unable to secure a new pricing agreement with Apple and with sapphire expected to drop further in value in 2015, the company ultimately decided that the best way to go about was to cancel the project and file for bankruptcy.
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