Apple Surprised by GT's Bankruptcy Filing, Considering Next Steps

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In the company's first public statement regarding the bankruptcy filing by its sapphire partner GT Advanced Technologies earlier this week, an Apple spokesman tells Reuters the company was surprised by the filing and that it is now figuring out its next steps.
"We are focussed 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," spokesman Chris Gaither said.
GT reportedly fell into difficulty when Apple withheld a final $139 million prepayment loan, part of a roughly $580 million package intended to help GT start up operations at the Mesa, Arizona sapphire production plant owned by Apple.

With Apple opting not to use sapphire for the display on the iPhone 6 and under no commitment to purchase sapphire from GT, the sapphire producer quickly started running out of cash. And with repayment on the Apple loan set to start in January, if not sooner, GT found itself needing to enter bankruptcy protection while reorganizing its business.

While the Apple Watch will use sapphire on some models, KGI Securities analyst Ming-Chi Kuo claims GT's bankruptcy should have no impact on that product as Apple can source sapphire for that product from multiple sources.

Article Link: Apple Surprised by GT's Bankruptcy Filing, Considering Next Steps
 

wxman2003

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Apr 12, 2011
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Apparently the sapphire glass did not meet Apple's new requirement of being bendable.
 

chrmjenkins

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Seems like a negotiating tactic against Apple to force them to infuse more cash or lose all of their progress. On top of the CEO's questionable stock sells, sounds like Apple should be trying to force him out of the picture (speaking strictly from their side. Apple's negotiations into how they were dictating GT's operations is worth its own debate).
 

840quadra

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I am likely missing some key aspects of the situation, but wasn't the bankruptcy due to an overreaction by the market regarding Apple not using Sapphire glass as their main display material for their new phones?

I could see why Apple would be surprised, as they have gone on record supporting GT Advanced with investment in an Arizona facility, and with plans to use the material on some models of the Apple watch. I guess the lack of the final advancement was enough for trigger happy investors to pull the plug.

I hope it wasn't sabotage by apple, but who knows.
 
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bbeagle

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Oct 19, 2010
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Apple loaned GT $441 million so far. GT is mismanaged and planned to not pay Apple back, which is why they filed bankruptcy.

Apple would be out another $139 million if they gave GT the remainder of the loan. GT would have just declared bankruptcy in January when the first payment came due.

It would be ridiculous for Apple to not pay $139 million to secure their $441 million investment, so Apple must have seen things going wrong at GT.
 

scbn

macrumors 6502
Jul 25, 2010
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Don't be surprise if you wanted them to produce tons of sapphires, then you decided not to use them, and demanded your money back.
 

mattopotamus

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Jun 12, 2012
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why not just pull a samsung and release the iphone 6 alpha with sapphire, followed by the iphone 6 prime with sapphire and waterproofing.
 

mattopotamus

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Jun 12, 2012
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Apple loaned GT $441 million so far. GT is mismanaged and planned to not pay Apple back, which is why they filed bankruptcy.

Apple would be out another $139 million if they gave GT the remainder of the loan. GT would have just declared bankruptcy in January when the first payment came due.

It would be ridiculous for Apple to not pay $139 million to secure their $441 million investment, so Apple must have seen things going wrong at GT.
They were planning on paying apple back, but when they decided not to use sapphire for the iphone 6 they were screwed.
 

Rogifan

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Nov 14, 2011
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I am likely missing some key aspects of the situation, but wasn't the bankruptcy due to an overreaction by the market regarding Apple not using Sapphire glass as their main display material for their new phones?

I could see why Apple would be surprised, as they have gone on record supporting GT Advanced with investment in an Arizona facility, and with plans to use the material on some models of the Apple watch. I guess the lack of the final advancement was enough for trigger happy investors to pull the plug.

I hope it wasn't sabotage by apple, but who knows.
Sure seems like the stock was being hyped solely based on rumors the new iPhones would have sapphire screens. Apple never said what it was doing with the sapphire so people making assumptions based on supply chain rumors are stupid.
 

Breaking Good

macrumors 65816
Sep 28, 2012
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I'm not a lawyer, but I understand that one of first things you learn in law school is never sue anyone who is broke.

My guess is that no matter what the management of GT may have done or not done, Apple has the deepest pockets so that is who investors and former employees of GT will go after in a class action lawsuit.

In an attempt to "protect American jobs", Apple got too close to its potential supplier and is now going to get burned by it.

I can't help but wonder what Wendell Weeks, CEO of Corning Glass Company (maker of Gorilla Glass), has to say about this. He said Sapphire was a poor choice for a display screen and everyone accused him of sour grapes.

Corning Glass needs to do some type of "I told you so" ad campaign.
 
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KdParker

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Apple loaned GT $441 million so far. GT is mismanaged and planned to not pay Apple back, which is why they filed bankruptcy.

Apple would be out another $139 million if they gave GT the remainder of the loan. GT would have just declared bankruptcy in January when the first payment came due.

It would be ridiculous for Apple to not pay $139 million to secure their $441 million investment, so Apple must have seen things going wrong at GT.
Agreed.

There must have been signs in order to withhold the payment. It is a shame that they have lost all the capital that was already loaned to GT.
 

840quadra

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That could be - it also could be that their manufacturing wasn't up to the quality they promised.
Sure seems like the stock was being hyped solely based on rumors the new iPhones would have sapphire screens. Apple never said what it was doing with the sapphire so people making assumptions based on supply chain rumors are stupid.
They were planning on paying apple back, but when they decided not to use sapphire for the iphone 6 they were screwed.
I am with Rogifan on this. I don't recall seeing any confirmation that Apple was going to use Sapphire for phone displays, only rumors. AFIK, the purpose of this facility is strictly rumored at this point, but could very well be for Apple Watches, and existing sapphire parts (TouchID and camera glass) at this point.
 

KPOM

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Oct 23, 2010
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I am likely missing some key aspects of the situation, but wasn't the bankruptcy due to an overreaction by the market regarding Apple not using Sapphire glass as their main display material for their new phones?

I could see why Apple would be surprised, as they have gone on record supporting GT Advanced with investment in an Arizona facility, and with plans to use the material on some models of the Apple watch. I guess the lack of the final advancement was enough for trigger happy investors to pull the plug.

I hope it wasn't sabotage by apple, but who knows.
The bankruptcy was because they were running out of cash, and quickly, after Apple withheld its $139 million payment.

What I don't understand is if GTAT were in such dire straits why it didn't tell Apple that they would file Chapter 11 if it didn't get the final installment, or at least restructure the debt? Perhaps it did, but then I'd have thought Apple wouldn't be able to put out a press release today talking about GTAT's "surprising" decision (i.e. they wouldn't have been surprised by it). Parsing words a bit, they aren't saying they were surprised, but it seems like splitting hairs.

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no impact on that product as Apple can source sapphire for that product from multiple sources.
Obviously, if Apple were really concerned about supplies of sapphire or losing its investment in the factories, they could provide GTAT with the DIP financing.
 

69650

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Mar 23, 2006
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What a crazy situation. Apple loans GT $500m to buy the plant and equipment to build a product for them but with no binding guarantees that Apple will actually buy their product when it's ready. What kind of a dumb ass CEO would agree to a contract like that. No wait the CEO has a $10m parachute, it's the GT shareholders who got screwed over. I hope they sue him for gross negligence.
 

840quadra

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The bankruptcy was because they were running out of cash, and quickly, after Apple withheld its $139 million payment.

.
It was my understanding (from here and other articles) that the payments are a prepayment loan from Apple to start operations at a plant Apple itself is building. I have to think (mirroring some other MacRumors users), that the bankruptcy it due to mismanagement of funds already received by GTAT.
 
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