GT Advanced's Failure Reveals the High Stakes Risk of Becoming an Apple Supplier
Apple and manufacturer partner GT Advanced parted ways after the sapphire supplier filed for bankruptcy earlier this year. While most Apple supplier relationships are kept secretive, the background story behind the GT-Apple partnership was revealed in a series of court documents filed by GT that were recently made public.
A follow-up report by The Guardian provides an interesting look at how a deal with Apple often can make and sometimes break a supplier. While the report does not introduce any significant new information, it is a good summary of the chain of events and may help some readers get caught up on the story.
In the case of GT, the outcome of its partnership with Apple was not favorable, with the supplier filing for bankruptcy in order to sever the ties between the two companies.
On 9 September Cook showed off the new phones - without sapphire screens. By 10 September GTAT stock was down 25% to $12.78; by Friday 3 October it stood at $11.05. On Monday 6 October, GTAT filed for Chapter 11, and its stock plummeted to $0.80. Trading ceased on 15 October.
Squiller says in the deposition that GTAT put itself into Chapter 11 bankruptcy (which protects a company from its creditors) simply to release itself from the Apple deal - and hence save the company.
The narrative of the relationship by GT paints a bleak picture of Apple and includes allegations of deceptive "bait and switch" business practices on Apple's part and onerous contract terms that led to productions delays. When GT questioned the contract it was about to sign, Apple reportedly confirmed "similar terms are required for other Apple suppliers" and told GT to "put on your big boy pants and accept the agreement."
In the end, GT failed to produce sapphire in suitable quality and sufficient quantity to meet Apple's demands. Instead of a success story, GT is an excellent example of what happens when a supplier goes all in with Apple and fails to scale its production technology fast enough.
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