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GT Advanced's Failure Reveals the High Stakes Risk of Becoming an Apple Supplier

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MacRumors

macrumors bot
Original poster
Apr 12, 2001
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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.

gt_advanced_logo.jpg
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.
Click to expand...
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.

Article Link: GT Advanced's Failure Reveals the High Stakes Risk of Becoming an Apple Supplier
 
Article Link
https://www.macrumors.com/2014/11/14/apple-gt-advanced/
SPUY767

SPUY767

macrumors 68020
Jun 22, 2003
2,041
131
GA
It reveals the high stakes of business. If you make promises on which you cannot deliver you get squashed.
 
S

SolarShane

macrumors 6502
Mar 7, 2014
302
0
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".
 
C

Cyber86

macrumors newbie
Jan 21, 2010
27
58
GTAT put itself into Chapter 11 bankruptcy [...] simply to release itself from the Apple deal - and hence save the company.
Click to expand...

And how did this save the company, exactly?
 
M

mbh

macrumors 6502
Jul 18, 2002
400
73
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.
 
S

spectrumfox

macrumors 6502a
Oct 18, 2013
751
1
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
 
H

H2SO4

macrumors 603
Nov 4, 2008
5,651
6,937
SolarShane said:
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".
Click to expand...

On the assumption you work for a corporation. There will be things in your contract that you will ignore, (or most likely haven’t read).
A classic example in technical roles is that you can’t work for someone else in that particular field for 12 months after leaving.

Here’s what I guess happens with a lot of people, some of which will be on this forum, they ignore and when a company tries to enforce they cry foul.

There are a lot of hypocrites here. Lots of people/businesses sign contracts and violate EULAs that they cannot/will not meet.
Copying of music is one of them. You buy the disc and then put your own slant on the legal parts that you signed up for when you bought it.

Let’s not pretend that GT are alone in doing something that we wouldn’t.
 
C

Ccrew

macrumors 68020
Feb 28, 2011
2,035
3
Cyber86 said:
And how did this save the company, exactly?
Click to expand...

More than likely made any monies owed not collectible unless approved by a bankruptcy judge - subsequently protecting any cash on hand that could be used for operating expenses.
 
MisakixMikasa

MisakixMikasa

macrumors 6502a
Aug 21, 2013
776
2
Waterloo, Ontario, Canada
SPUY767 said:
It reveals the high stakes of business. If you make promises on which you cannot deliver you get squashed.
Click to expand...

Even if they can make enough products that satisfies Apple, there is no guarantee that Apple would buy from them. They could still go broke even if thy have met Apple's standard. The risk they taken is too high.

You can argue that Apple do the same thing to other supplier, but suppliers like Samsung and Foxcoon are large enough to handle the risk. I think GT Advance is not big enough to absorb all the risks
 
K

kreychek

macrumors newbie
Nov 14, 2014
2
0
Apple screwed up

Some people here don't want to hear that but regardless of GT Advanced having gambled to high, Apple's department responsible for the deal really screwed up.

Since Apple was in the more powerful position, they should have done something to prevent GTA from going down. Now it's just a huge mess with a lot of finger-pointing, let alone the negative media coverage.

All this seems very unprofessional to me. However, we do not know the whole story.
 
C

ClamshellOfDoom

macrumors member
Apr 18, 2013
33
0
Tallahassee, FL
SolarShane said:
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".
Click to expand...

In business, there's always a risk, if of nothing else but the unexpected. Sure, GT took on a risk when it signed. In fact, they took on multiple risks. By the by, how do you know that they were blinded by greed? Sounds like you have some inside information...or...you're simply speculating.
 
wlossw

wlossw

macrumors 65816
May 9, 2012
1,109
1,164
Montreal, Quebec, Canada
I think the moral of the story is don't sign 1-sided contracts with onerous terms without an escape plan. There's no such thing as 100% probability of success.

It looks like the decision makers made quite a few bucks selling stock whose value was based on the deal, and the company did get out of the deal by restructuring... so the only one holding the bag are stock-holders..

so maybe not so dumb after all.
 
cfedu

cfedu

Suspended
Mar 8, 2009
1,166
1,566
Toronto
Nicksd84 said:
Soooo... Are we ever gonna see sapphire screens?
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I think this is what killed GT!! Sapphire was never going to happen anytime soon. At 30$ for a display it would be the most expensive part of an iPhone. GT might not have been able to read the contract, but they should have known they overpromssied.
 
WildCowboy

WildCowboy

Administrator/Editor
Staff member
Jan 20, 2005
18,390
2,825
IJ Reilly said:
Apple can, and does, drive a hard bargain. How anyone can claim this "paints a bleak picture of Apple" is beyond me.
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GT is indeed painting a bleak picture of Apple...they have to put the blame on the other guy.
 
jayducharme

jayducharme

macrumors 601
Jun 22, 2006
4,529
5,972
The thick of it
luckydcxx said:
They should have put their big boy pants on like they were told.
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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.
 
D

Deelron

macrumors regular
Jan 30, 2009
235
113
But GTAT faced an uphill battle almost immediately. Apple offered a lower price for the sapphire than GTAT expected,
Click to expand...

Wait what? You bet your whole company and didn't get an acceptable price range locked in? Foolhardy hardly covers GTs actions.
 
R

Rossatron

macrumors 6502a
Apr 4, 2013
663
209
in a ziplock bag inside a car's trunk
This is getting really boring. All these documents show is that Apple sends men-eating-petrol-drinking-crocodile-transformers to handle negotiations with other companies, and that GT sends baskets of muffins, and gets too tired after delivery.

I mean, it's pretty obvious that Apple - or any other company - would try to serve *their* best interests, not the other party's. I just don't understand why GT didn't do the same. But hey, if a company is "too tired" from such meetings and just want to end them then yo can't expect much.
 
T

tasset

macrumors 6502a
May 22, 2007
572
200
Two things come to mind regarding Apple's relationships with its suppliers:
1) Jobs was a product visionary but Apple would be nowhere without Cook in charge of operations. It's been obvious since the original iPod Nano that someone in the relationship is in a subordinate position and it ain't Cook.
2) Letting a component supplier turn into a massive competitor (Samsung) was a mistake that Apple does not plan to repeat.
 
Rogifan

Rogifan

macrumors Penryn
Nov 14, 2011
24,124
31,156
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.
Click to expand...

Seriously MR? Are you that hard up for things to report on? My guess is if you took a poll of MacRumors readers not many would ask to get caught up on this story.
 
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