GTAT: Apple strong-armed us into deal that bankrupted company
By now, you're probably aware that Apple's Sapphire provider GT Advanced went belly-up a few weeks ago. If you're not, we encourage you to click links in this article and in our timeline below, as the meltdown is both contextual and interesting. After previously noting the deal they struck with Apple was unfair, GT Advanced is now detailing their feelings. In retrospect, GT Advanced says they're not sure Apple's original offer was ever really honest, and insists they were insulted through the process.
According to GT Advanced, Apple originally approached them to purchase a massive quantity of furnaces to grow the Sapphire glass. Sapphire was supposed to be included on the iPhone 6, which was why Apple wanted so many furnaces and so much Sapphire.
Over the course of negotiating with Apple, GT Advanced says the terms of the deal changed. I'll let GT's bankruptcy filing detail the gritty details for you:
In hindsight, it is unclear whether Apple ever intended to purchase any sapphire furnaces from GTAT. Indeed, after months of extensive negotiations over price and related terms, Apple demanded a fundamentally different deal:
Apple no longer wanted to buy furnaces from GTAT; instead, Apple offered an arrangement that required GTAT to borrow money from Apple to purchase furnace components and assemble furnaces that would be used to grow sapphire for Apple
That much we knew; Apple was letting GT borrow money to purchase furnaces to run their facility. We also know Apple didn't have to purchase any Sapphire from GT, effectively putting them in a high-risk situation.
Here's where it gets good, though:
When GTAT's management expressed obvious concerns to Apple regarding the deal terms during the contract negotiations, Apple responded that similar terms are required for other Apple suppliers and that GTAT should: 'Put on your big boy pants and accept the agreement'
Ouch. GT also notes that the deal wouldn't have actually worked for them unless Apple bought Sapphire in excess of the loan repayments, which they were under no obligation to do. GT also says they were a "captive" supplier for Apple.
As we've said before, GT Advanced was under zero obligation to sign any deal with Apple, so we're sharing this with you for insight. If GT Advanced is accurate in their portrayal of this deal, Apple strong-armed them into a position that only benefitted Apple. If that's true, it's worth noting that GT Advanced failed at several turns to satisfy terms of the deal they signed.
Bottom line: GT Advanced gambled, lost, and is now crying over a beer at the lounge. Given the scope of what we know, it just plain seems like GT was in over their heads, and sank as a result.