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.

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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.

Top Rated Comments

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66 months ago
It reveals the high stakes of business. If you make promises on which you cannot deliver you get squashed.
Rating: 25 Votes
66 months ago
Here's a moral of this story: Don't sign a contract with an industry giant unless you are absolutely 100% certain you can fulfill it, especially if it contains terms that are onerous and one sided and has severe penalties for failure.
Rating: 20 Votes
66 months ago
They should have put their big boy pants on like they were told.
Rating: 15 Votes
66 months ago
Apple can, and does, drive a hard bargain. How anyone can claim this "paints a bleak picture of Apple" is beyond me.
Rating: 14 Votes
66 months ago
Seriously MacRumors? "There was a risk". "A classic Apple bait and switch". Wow.

They were blinded with greed and WILLFULLY signed a contract with Apple! They could've back out at any time. Did they? Nooooo! There was no risk. There was no "bait and switch".
Rating: 12 Votes
66 months ago
Ahh, here comes another thread of people pretending they know exactly what happened with this business arrangement between GT and Apple.

Suddenly everyone's a business major, and has insider information.

"Gotta support the team." -- Puddy
Rating: 7 Votes
66 months ago

GTAT put itself into Chapter 11 bankruptcy [...] simply to release itself from the Apple deal - and hence save the company.


And how did this save the company, exactly?
Rating: 6 Votes
66 months ago

They should have put their big boy pants on like they were told.


It reminds me of when Jobs approached Corning before the iPhone's original launch. He wanted to use their Gorilla Glass on the iPhone's screen, but Corning initially didn't think it was capable of producing enough to satisfy demand. Jobs gave them a similar "big boy" line, urging them to rise to the occasion. Corning did, and the rest is history.

GT could have done the same, in theory. Perhaps in practice it was too complicated. But heck, that company had been producing sapphire for years. Either the CEO was completely ignorant of what Apple required, or he was just chasing after quick money. I find it hard to believe that the company didn't understand the challenges going into the deal.
Rating: 5 Votes
66 months ago

I love the armchair business analysts who know all the details of the situation and can correctly point out who was at fault, why they were at fault and so on.


Well played MR in creating another thread bound to get lots of hits.


Apple is always in the right, didn't you know?
Rating: 3 Votes
66 months ago
I love the armchair business analysts who know all the details of the situation and can correctly point out who was at fault, why they were at fault and so on.


Well played MR in creating another thread bound to get lots of hits.
Rating: 3 Votes

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