Skip to main content

Apple and its sapphire supplier finally shake hands and part ways (Updated)

apple sapphire screen supplier gt advanced technologies files bankruptcy version 1413967235 bankrupt
Image used with permission by copyright holder
Apple’s iPhone 6 models were widely rumored to sport sapphire screens ahead of the launch, but it turned out that the glass wasn’t made of the precious gemstone. Since then, there’s been a lot of speculation as to what happened. Prior to the launch, news of Apple’s exclusive, $578 million deal with sapphire glass producer GT Advanced Technologies seemed to hint that sapphire was a sure thing.

Updated on 11-04-2015 by Kyle Wiggers: Added news of a $439 million settlement agreement between Apple and GT Advanced. 

One month after the iPhone 6 and 6 Plus launched without sapphire, GT Advanced filed for Chapter 11 bankruptcy protection, and asked the court permission to “wind down” activities at the Mesa, Arizona sapphire plant, according to Recode. Subsequently, Reuters and other major news outlets stated that an “amicable” deal has been struck between the two companies. The Wall Street Journal reports that GT will seek a bankruptcy judge’s approval for the settlement next week.

Court filings from the sapphire supplier called the Apple deal “oppressive and burdensome.”

GT CEO says he’s pleased with the negotiated deal

As part of the deal, Apple will recover its $439 million pre-payment made to GT Advanced over the course of four years, without interest, through an auction of between 1,400 to 2,000 of GT’s sapphire-making furnaces in November. Proceeds are to be split between Apple and GT, according to court papers, and any unsold equipment (with the exception of 600 furnaces that GT Advanced will retain) will be given to Apple for scrap. In exchange, Apple has agreed to forgive any remaining debt.

The amended settlement follows the agreed-upon shuttering of GT Advanced’s Mesa, Arizona manufacturing plant in October of 2014. Apple has announced plans to repurpose the facility as a data center.

“We are pleased with the settlement that we have negotiated with Apple,” said GT CEO Tom Gutierrez in a statement last year. “We realize that our filing for Chapter 11 protection has caused uncertainty and hardship for many of our important stakeholders. We have been working diligently to develop a restructuring plan that will allow us to emerge from Chapter 11 as quickly as possible and with the operating flexibility and resources to position GT for long-term success.”

Partnership described as oppressive and burdensome

Earlier in the case, court filings from the sapphire supplier called the Apple deal “oppressive and burdensome” and blamed the iPhone maker for GT’s bankruptcy. GT Advanced asked that the agreement with Apple be declared void and said it may pursue future claims against Apple once the Chapter 11 bankruptcy filings are complete.

“As discussed in detail in the Supplemental First Day Declaration, the agreements imposed oppressive and burdensome terms and obligations on GTAT,” the filing reads. “The contracts and leases … provide no benefit to GTAT’s estates, and GTAT’s continued performance under the Agreements is no longer a viable business option … The Agreements also are not a source of potential value for GTAT’s future operations, creditors, or interest holders and constitute an unnecessary drain on GTAT’s resources.”

iPhone 6
Image used with permission by copyright holder

An affidavit filed by GT Chief Operating Officer Daniel Squiller last year portrays a vexatious relationship between the two companies. Apple, Squiller writes, used “bait-and-switch” tactics to shift most of the financial risk to GT — it delayed construction of the Mesa, Arizona facility for months and maintained a “highly contaminated environment” that “adversely affected the quality of sapphire material.” Additionally, Squiller said, Apple demanded exclusivity — as part of the sales agreement, GT Advanced couldn’t sell sapphire to any other company — and reserved the right to cancel orders and shipments at any time.

Another filing details the company’s plans for the Mesa factory, which included laying off  hundreds of employees, selling the manufacturing equipment, and finally, closing the factory. Previously, GT Advanced was said to be looking for debtor-in-possession financing to get more money for operations.

Apple appeals, wants to protect confidentiality

Early in the trial, Apple formally requested that the court allow it to appeal GT Advanced Technologies’ bankruptcy privately. The court document, which was obtained by Ars Technica, says that Apple hopes to protect confidential information that it shared with GT Advanced in private by keeping the proceedings out of the public eye.

“Apple seeks to file under seal the Objection in order to protect the confidential commercial information contained therein and to comply with the terms of its confidentiality agreements with GTAT,” Apple’s lawyers explained.

Although the motion did not explain which aspects of the bankruptcy Apple wants to appeal, the document did state that its objections deal with “confidential research, development, or commercial information regarding Apple’s business processes.”

GT Advanced was to receive $578 million from Apple in four installments to build the sapphire factory in Mesa, Arizona in 2013. That money was also meant to pay 700 employees and cover production costs for many sapphire screens. Of course, Apple would only pay the company if it met its specific requirements on time. GT Advanced was supposed to pay that money back over the course of five years, starting in 2015.

GT Advanced sapphire boule
Image used with permission by copyright holder

A few days after GT Advanced Technologies filed for bankruptcy, Apple expressed surprise over the filing, as reported by the Wall Street Journal. “We are focused on preserving jobs in Arizona following GT’s surprising decision and we will continue to work with state and local officials as we consider our next steps,” Apple said.

However, according to people familiar with the situation, Apple should not have been surprised at all. The sources said that Apple didn’t pay a final installment of almost $140 million to GT Advanced, when the company failed to meet agreed-upon technical specifications on time.

GT says it’s not out of business

As of September 29, GT had just $85 million in the bank and now that it’s filed for bankruptcy, its stock price is down more than 90 percent to $1. GT Advanced’s factories will still be able to proceed as normal in the meantime. The company assured investors that it plans to stage a comeback.

“Today’s filing does not mean we are going out of business,” Tom Gutierrez, GT’s CEO, said in a statement. “Rather, it provides us with the opportunity to continue to execute our business plan on a stronger footing … and improve our balance sheet.”

It was initially unclear whether GT’s precarious financial situation would prompt Apple to abandon its sapphire screen plans for future iPhones or if it will eliminate the possibility of sapphire casings on select Apple Watch models. However, as reported by DigiTimes last year, Apple’s now sourcing sapphire displays from three overseas suppliers: South Korea’s Hansol Technics, China’s Harbin Aurora Optoelectronics Technology, and Russia’s Monocrystal.

In a report to investors obtained by AppleInsider, KGI analyst Ming-Chi Kuo said that although Apple’s getting enough sapphire to outfit certain Watch models, its plans for sapphire screens on future iPhones are in disarray.

Previous updates:

Updated on 10-23-2014 by Malarie Gokey: Added statement from GT Advanced Technologies and settlement details.

Updated on 10-15-2014 by Malarie Gokey: Apple requests permission to appeal GT Advanced Technologies’ bankruptcy in private to protect confidential information.

Updated on 10-10-2014 by Malarie Gokey: GT Advanced Technologies calls Apple deal “oppressive” in court filing, blames company for bankruptcy.

Updated on 10-10-2014 by Malarie Gokey: GT Advanced Technologies asks to close factory, but supply chain says Apple has more sapphire suppliers for the Watch.

Updated on 10-08-2014 by Malarie Gokey: Apple responds to the bankruptcy filing with surprise. 

Malarie Gokey
Former Digital Trends Contributor
As DT's Mobile Editor, Malarie runs the Mobile and Wearables sections, which cover smartphones, tablets, smartwatches, and…
The iPhone 17 could be a photographer’s dream
The Apple iPhone 15 Plus and Apple iPhone 15 Pro Max's camera modules.

Apple's iPhone 16 series is likely to debut in September. Yet, it increasingly looks like next year's iPhones could feature the most significant iPhone changes in many years. The latest iPhone 17 rumor comes from The Information, and it's a good one.

According to the new report, at least some of next year's iPhone models will ship with a camera with variable aperture. This isn't a new technology, but it would be the first time it would be on an iPhone.

Read more
This year’s big AT&T outage was worse than we thought
An at&t office building.

Back on February 22 this year, AT&T suffered a massive outage after a botched network update. Now, months later, the full scale of the outage has been revealed — and it’s much bigger than we thought at the time.

"All voice and 5G data services for AT&T wireless customers were unavailable, affecting more than 125 million devices, blocking more than 92 million voice calls, and preventing more than 25,000 calls to 911 call centers," the Federal Communications Commission (FCC) said in its report.

Read more
The Garmin vívoactive 5 smartwatch is still at its Prime Day price
Stress monitoring on the Garmin Vivoactive 5.

Having the ability to track your health and wellness on a day to day basis can be quite the invigorating and inspiring experience. Keeping tabs on steps, heart rate, oxygen levels, sleep, and other fitness-oriented criteria can help you make informed decisions about medical care. It’s also a great way to know you’re keeping up with the goals you’ve set for yourself.

One of the best ways to stay on top of all these metrics is with a wearable. Made by numerous companies, many traditional smartwatches (and we have an entire list of smartwatch deals to peruse) can double as fitness trackers, but it’s the dedicated health-monitoring devices that usually deliver the best results. You’ve probably heard of brands like Garmin and Fitbit. Well, today we’ll be focusing on the former.

Read more