Earlier today, an Apple representative told Reuters that the company was surprised by GT Advanced's decision to file for Chapter 11 bankruptcy on Monday, and The Wall Street Journal has now published some new information on the behind the scenes dealings between the two companies.
According to inside sources, Apple was caught off guard by GT's filing because it had been working with GT to make sure the latter company would be able to pay all of its debts. Apple, aware of GT's weak cash position, also reportedly held off on asking for loan repayments on the $439 million GT has received so far.
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On Wednesday, Apple called the bankruptcy filing "a surprising decision." A person familiar with the matter said Apple had been working with GT to keep it solvent. In addition, Apple hadn't demanded repayment of loans as it could have, based on GT's weak cash position, people familiar with the matter said.
As part of its loan agreement, Apple was entitled to ask GT Advanced for repayment if its cash holdings fell below $125 million, but Apple has opted not to demand repayment.
In addition to holding off on asking for loan repayment, Apple is also attempting to help GT qualify for the final $139 million payment that Apple has thus far withheld from the company. GT has not yet received the payment because it has reportedly failed to deliver on the technical milestones that it was contractually obligated to meet under the original terms of the $578 million loan that Apple provided for purchasing equipment.
Though Apple was widely rumored to be using GT Advanced sapphire for the iPhone 6 and 6 Plus displays, the company opted to stick with Gorilla Glass, leading to troubles for GT Advanced. Apple provided GT with a facility and a loan to buy equipment, but was not required to purchase GT's sapphire, which has eaten into GT's cash pile.
GT, meanwhile, has reportedly run into manufacturing issues that have impacted yield, explaining why Apple may have passed on sapphire screens for its new iPhones. GT is also subjected to exclusivity provisions limiting what it is able to sell to other companies.
Apple's upcoming Apple Watch will use sapphire on some models, but GT's bankruptcy is unlikely to impact the production of that device as Apple can use sapphire from other sources. The future of sapphire display covers for iPhones is less certain, however, as there are few other sources where Apple can obtain enough high-quality sapphire.
GT Advanced will have its first Chapter 11 bankruptcy court hearing tomorrow, where it is expected to divulge additional information on the reasons behind its bankruptcy filing.
Top Rated Comments
(View all)I love it when apple plays the good guy role.
Hold up. Apple are the reason GT are in this mess.
Apple: "we will loan you $500m for new equipment to make sapphire for out phones"
GT: "ok"
Apple: "you can't sell the sapphire to anyone else, only us"
GT: "ok, we will give you exclusive access because of the loan."
Apple: "we don't want your sapphire now, and you aren't allowed to sell it to anyone else."
GT: "WTF! How are we supposed to make money?"
Hold up. Apple are the reason GT are in this mess
Or, it went something like this:Apple: "We've developed a revolutionary technique for producing sapphire screens and we hear this is right up your wheelhouse. Can you manufacture these for us in the quantities we require?"
GT: "Sure, if you loan us a ton of money for expensive equipment."
Apple: "Ok, if you can guarantee production in sufficient numbers within our required timeframe, we can loan you $500m for new equipment and commit to buying a crap ton of them from you under an exclusive contract. "
GT: "You've got a deal!"
Months later...
GT: "Oops, we've run into manufacturing glitches and won't be able to deliver anywhere near the quantities you need within the expected timeframe and cost. Can you send over the rest of the money you were going to loan us before we file for bankruptcy?"
Apple: :-|
Hold up. Apple are the reason GT are in this mess.
Apple: "we will loan you $500m for new equipment to make sapphire for out phones"
GT: "ok"
Apple: "you can't sell the sapphire to anyone else, only us"
GT: "ok, we will give you exclusive access because of the loan."
Apple: "we don't want your sapphire now, and you aren't allowed to sell it to anyone else."
GT: "WTF! How are we supposed to make money?"
No. GT's failure to deliver is the reason. Apple wants to use it, but needs a LOT of it. GT said they could do it and then didn't do it. No body grabbed GTs hand and made them sign anything.
Hold up. Apple are the reason GT are in this mess.
Apple: "we will loan you $500m for new equipment to make sapphire for out phones"
GT: "ok"
Apple: "you can't sell the sapphire to anyone else, only us"
GT: "ok, we will give you exclusive access because of the loan."
Apple: "we don't want your sapphire now, and you aren't allowed to sell it to anyone else."
GT: "WTF! How are we supposed to make money?"
i guess you didnt read the article.