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

SPUY767 Avatar
105 months ago
It reveals the high stakes of business. If you make promises on which you cannot deliver you get squashed.
Score: 25 Votes (Like | Disagree)
mbh Avatar
105 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.
Score: 20 Votes (Like | Disagree)
luckydcxx Avatar
105 months ago
They should have put their big boy pants on like they were told.
Score: 15 Votes (Like | Disagree)
IJ Reilly Avatar
105 months ago
Apple can, and does, drive a hard bargain. How anyone can claim this "paints a bleak picture of Apple" is beyond me.
Score: 14 Votes (Like | Disagree)
SolarShane Avatar
105 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".
Score: 12 Votes (Like | Disagree)
spectrumfox Avatar
105 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
Score: 7 Votes (Like | Disagree)

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