GT Advanced COO Blames Apple's Strict Sapphire Contract Terms for Bankruptcy Filing

[MacLC]

I know that everyone will get on GTAT's back about this, but I respect his point. Apple has billions upon billions of dollars, they don't. GTAT took a chance, and failed. It should be respected that they tried.

This is also a loss for Apple. Obviously, Apple wanted this work done, and they wanted the expertise that GTAT had. Perhaps if Apple was not as heavy handed with the contract terms, this would have worked out for all.

It's not necessary for Apple to flex its corporate muscle all the time. Sometimes it can backfire.

You are correct. In the long run it will backfire because Apple sets the precedent both relationally and legally that there is no leeway for missing deadlines in an industry where actually meeting a deadline is a rarity.

What is sad is the Apple fanbois here suddenly finding it fashionable to disrespect the same GT Advanced that was fashionable to fawn over just one month ago. It seems as though most people here join the fan club as lemmings.

 

[wikiverse]

Of course the terms put Apple in charge of everything. You don't work with a company like Apple on a product like this and expect any less.

The customer always dictates the terms in the end. A seller may dictate the price , but the customer dictates the terms at which they will buy.

In cases like this, the seller (GT) had no leverage to begin with. They were a relatively small company to begin with. If they were to even hope to meet Apple's needs, they'd need their active support and assistance--which they were given. If Apple's people were causing problems, somebody at GT needed to speak up and fix those problems.

There's two sides to every story, we'll see how this all shakes out in the end, but it sounds like somebody's really bitter about the fact that things didn't work out as planned.

Well there is also the issue of cheaping out on backup power and not letting the company whose job it is to manufacture the product purchase their own cutting tools or adjust machine settings.

Seems like Apple were micromanaging to protect their investment but ended up contributing to the failure by allowing GT to do what they needed to do.

I've had similar clients that don't give you the freedom to do the job you're hired to do and who shift deadlines and force you into production before development, testing and scoping are complete.

The contract probably sounded reasonable at the time because you are working on scope and development, but then the client puts a rush on the job and suddenly you're in a position where their demands just can't be met. And often clients just don't hear the word 'No'.

Of course not everyone at apple would be like that, it only takes one or two people who are leading the specific project to create problems.

 

[Keirasplace]

Well there is also the issue of cheaping out on backup power and not letting the company whose job it is to manufacture the product purchase their own cutting tools or adjust machine settings.

Seems like Apple were micromanaging to protect their investment but ended up contributing to the failure by allowing GT to do what they needed to do.

I've had similar clients that don't give you the freedom to do the job you're hired to do and who shift deadlines and force you into production before development, testing and scoping are complete.

The contract probably sounded reasonable at the time because you are working on scope and development, but then the client puts a rush on the job and suddenly you're in a position where their demands just can't be met. And often clients just don't hear the word 'No'.

Of course not everyone at apple would be like that, it only takes one or two people who are leading the specific project to create problems.

Your taking the words of whinners as truth and they signed a god damn contract and hopefully they read it before signing it. ThaT's all I'll say.

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What all you fail to consider is that Apple WANTED GT to succeed - so Apple was just as stupid as GT in this, to impose a contract that was so onerous that it led to GT's demise.
Everyone acts like GT was stupid to agree to this contact. Apple was stupid too then, because they agree to it, and didn't get what they wanted either.

You are the one that doesn't realize that Apple relied on GTAT to assess the tech they were selling them. If they oversold themselves, it is not Apple's fault they didn't succeed.

That's like Microsoft overselling themselves to IBM and then buying another company (without telling them about IBM) to fullfill the contract. MS overselling themselves was a huge risk. But it was the key contract that made them, so its hard to argue that this risk wasn't worth it. But for every risky move that turns up right for the seller, 5 may end in them paying big time.

Most startups overpromise and then flame out, that setup was almost a startup like situation. In startups, the investors which poney up all the money are more involved in the situation than the shareholders or bondholders in normal private companies.

 

[TypeEE]

GTAT always say how small they are, and how Apple bullied them and so and so. Imagine, how much trust Apple had to put in this small company to rely on it and make hundreds of million iphone screen. Imagine if GTAT pushed forward and delayed the iPhone6 launch, how much lost would that be? Half of Apple rely on the iPhone.

 

[captain kaos]

Of course Apple isn't going to pony up half a billion unless they have strict demands for a high quality product.

GTAA shouldn't have signed if they couldn't promise the results.

Not true. Its like signing up someone to score goals for you, without telling them when they want the goal, and they goal posts will be constantly moving. And if you fail you pay up.

 

[Gobeatty]

Ridiculous. They signed and failed to deliver.

I suspect the contracts with Faxconn and Apple's other providers are similar.

The sooner Apple is done with this wasted effort the better.

 

[wikiverse]

Ridiculous. They signed and failed to deliver.

I suspect the contracts with Faxconn and Apple's other providers are similar.

The sooner Apple is done with this wasted effort the better.

The question then becomes: WHY did they fail to deliver?

People wanted details that answered that question and some have now been presented to us. It would appear (based on this article) that the contract gave Apple the power to make decisions regarding back-up power and tool purchasing, and some poor decisions were made.

One would think that Apple would have worked closely with GT to make these decisions, or allowed GT to make the purchases themselves with Apple's oversight. Based on the limited information that we have, that doesn't appear to have been the case.

 

[Tech198]

haha... no kidding... what did i say....

Of course, it led to it.... All apple cares abut is their customers, they don't give a rat's ass over their supplies who make the materials..... From Apple's point of view, they are just like your typical boss at work..

He just wants it done, even if your sweating like a pig.

Too much sapphire, too quickly, its bound to have happened..

Next time when/if Apple decides again to do Sapphire, i hope they learned something from this..

It would be pretty dumb to do the same thing again.

 

[KPandian1]

GTA - Grand Theft Arizona!

Considering that the exacting needs from Apple were upfront, and that the management of GTA managed to insider stock trade for a colossal profit, I have little inclination to hear their whining!

There goes another job segment to Chine from the USA! Did GTA think it will be able to hire teens and pay slave wages (as is in Chine), and deliver the goods and make a profit? No, they went into this with the full intention of the stock trade profit rather than the sweat and grit manufacturing route!

Any Apple device made outside USA is slave produced - a combination of greedy capitalism and autocratic communist labor! Blame the WTO rules that the West signed, to benefit the top 0.1%!

An iPhone 6 would cost more than $2000 at the least, if made in the USA!

That said, these are not silk carpets or bricks (India) that we are buying - these are regular industrial products that can be made in any country - just choosing the cheapest places to manufacture under these "fair" trade rules makes sense to the CEOs!

Apple or any other product made in the far East - think HP, Dell, etc., - have become everyday products only because of the places at which they are made. Compare the price of desktops of late 80's to mid 90's and now - the electronics world is better!

I have no qualms having bought ALL my electronics since the 90's - all made outside the USA - those are the rules we are forced to play by!

The difference between the once cheap Japanese labor, and the two or three decades of Chinese labor, is the quality of life the workers experience - they can actually afford to buy the products they make! These are not Rolls Royce employees!

Cost of production in Japan, and, now, even in Taiwan is high - all automobile parts are made in China - even if the cars are Japanese, Korean or USA labelled!

The SEC should be looking to arrest the GTA bosses for their illegal stock trading; who knows, it just might happen!

 

[TimelessOne]

Kind of why you do not want to get in bed with Apple as a supplier. Apple as a reputation of being worse than walmart to their suppliers. Apple knows they are the biggest player on the block and they use that power to bully others and do not care who they destroy in the process.

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Your taking the words of whinners as truth and they signed a god damn contract and hopefully they read it before signing it. ThaT's all I'll say.

I would not say he is take the words of the whiners as truth. More he is speaking from experience in general. Company I work for has gotten into messes like this before. When the contract was signed everything seem pretty reasonable and was great. No big deal we were doing the work they wanted ect. Well then one of their higher ups got involved and started really screwing with things and found ways to make us jump threw hoops. We lost a lot of money in the end on that deal. Now the company I work for was large enough to eat that lost but fact is it push several other project back over a month and we spent about 3 months getting everything back on track.

Like he said it only takes one or 2 people to really screw things up. That is sadly how a lot of things in business work.

 

[Em8ch]

Sounds to me like GTAT did a really bad risk assessment (if they even did one at all) before accepting the terms of the contract. This is on nobody else but themselves.

"What happens if we can't meet the quality requirements?" should have been one of the top questions in their risk assessment.

Nincompoops.

 

[irnchriz]

I know that everyone will get on GTAT's back about this, but I respect his point. Apple has billions upon billions of dollars, they don't. GTAT took a chance, and failed. It should be respected that they tried.

This is also a loss for Apple. Obviously, Apple wanted this work done, and they wanted the expertise that GTAT had. Perhaps if Apple was not as heavy handed with the contract terms, this would have worked out for all.

It's not necessary for Apple to flex its corporate muscle all the time. Sometimes it can backfire.

If you look at how the boss of GTAT handled his shares it's fairly obvious that he was out to make a buck and then trash the company, he did pretty well out of the deal, walking away with over 100 million dollars. it looks more and more like Apple took a chance on here guys and put severe penalties in place so that they wouldn't be left hanging or out of pocket.

 

[Mums]

I know that everyone will get on GTAT's back about this, but I respect his point. Apple has billions upon billions of dollars, they don't. GTAT took a chance, and failed. It should be respected that they tried.

This is also a loss for Apple. Obviously, Apple wanted this work done, and they wanted the expertise that GTAT had. Perhaps if Apple was not as heavy handed with the contract terms, this would have worked out for all.

It's not necessary for Apple to flex its corporate muscle all the time. Sometimes it can backfire.

Exactly. The people slating GTAT have evidently never run a small / medium business. To get ahead you've got to risk everything and submit to the whims of larger companies. That's why small businesses fail so often. It appears Apple was unfair with GTAT, as big companies usually are. The GTAT COO is just telling it like it is, because he's. businessman.

 

[5232152]

This sort of Apple business model is just plain disgusting...

 

[MH01]

Protip: Don't sign contracts that are highly favorable to the other entity.

Protip2: that's how the real world works.

Your in fairyland if you think apple were not in a position to dictate the terms. Put yourself in a position of needing capital desperately for a startup, your get buy in from a billionaire, come contract negotiations , who do you think is going to dictate the terms??? You are going to take the risk, accept a one sided contract and hope it works out.

Check out the music industry, contracts are very one sided !

The little players have to take the risk to get into the industry, you always gets screwed on the first contract.

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This sort of Apple business model is just plain disgusting...

Sadly it's same for all big companies.

People want to think apple is the good guy and different, they just do what all the others do.

Most of us just get to see the happy awesome customer service side of apple.

 

[Keirasplace]

Exactly. The people slating GTAT have evidently never run a small / medium business. To get ahead you've got to risk everything and submit to the whims of larger companies. That's why small businesses fail so often. It appears Apple was unfair with GTAT, as big companies usually are. The GTAT COO is just telling it like it is, because he's. businessman.

Right... You do know that most businesses fail because there was NO GOD DAMN MARKET, overcommit for their product (time, resources, etc) or because of their own sheer idiocy. Cash flow management being the most prevalent reason for failure of all businesses big and small.

The one that get screwed the most in startups are usually the investors, not the salaried workers. You seem to very flippant with Apple's money.

I've worked in 3 startups in my life so I've seen a lot of crap. Was paid quite well in two of them until they collapsed.

Only really lost when I was an investor and lost a whole year with a very low salary I was paying myself.

 

[alexgowers]

it sounds like GT signed something they couldn't deliver.

I assume someone over promised inside GT and that led to thinking they could produce enough of the product when clearly they were still working out the kinks.

If GT had been able to deliver on time and had the process down, they would be beyond sorted! But hey they took a risk and it didn't pan out. It's a shame but I don't think a contract signed by everyone and agreed can be to blame.

I think it was probably management taking the word of a scientist who probably could have delivered but wasn't aware of extra issues in scaling. Management didn't consider it either and set themselves up for a fall.

 

[Steve121178]

I think some of you are being harsh on GT. Yes, they signed a contact and they are undoubtedly responsible for their actions. However, if this had worked, they would have had one of the worlds biggest companies as their primary customer and would have made a ton of money.

In business, sometimes you have to take huge enormous gambles. Sometimes these gambles pay off handsomely, other times they go drastically wrong. At the end of the day Apple can abuse their position and almost dictate the terms of an entire contract. This really needs to be investigated because it's completely unacceptable for a business to fail like this and Apple to not be held in some way accountable for the unreasonable demands they were putting on GT. But I am a realist and ultimately Apple will get away with this and no one will care about GT or their staff who are now out of work.

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The little players have to take the risk to get into the industry, you always gets screwed on the first contract.

Probably the most sensible comment posted in this thread.

 

[macgabe]

Come on, who here in business hasn't at some time made a promise they were not able to keep? Whether you're a taxi driver, own a print shop or have a large government contract, it happens all the time. It is part of business to try and sometimes to fail. It's why people default on their loans, and why businesses go bust. Why all the morality and mud-slinging? It's just business.

 

[nebo1ss]

Nobody is required to manufacture for Apple. You know going in they have high standards, they never hide that fact. This company was a failure waiting to happen. Apple went to length to help them be successful and they blew it. How many places get a factory built for them and cash advances like Apple gave them? Not many. Apple could of nailed them on this breech of contract and destroyed their company, but they were gracious.

That is why they filed for Bankruptcy it provides Court protection from Apple taking any action against them. Nothing about Apple being gracious.

They should never have signed the contract but Bankruptcy was the only way out for them.

 

[Tom-Create-Pro]

It's always difficult dealing with a company much larger than yourself. You're always on the back foot and unfortunately this time the small man got burnt.

 

[jaded-mandarin]

So much blind Apple love in here, I understand this is 'MacRumors' but you think there'd at least be some intelligent non-bias discussion from a more rounded perspective....very disappointing.

Forget contracts and whatnot for a minute, what about social responsibility, to workers (in Apple's own country). $300,000 fines on $20,000 stock. Apple stipulated this knowing full well if GT couldn't yield what it needed to it would face certain bankruptcy, and the loss of jobs to however many.


Nothing but shameful.

 

[macaron95]

Did Squiller go to school in order to learn how to read a contract before signing it ?

 

[KPandian1]

Innocent?

Exactly. The people slating GTAT have evidently never run a small / medium business. To get ahead you've got to risk everything and submit to the whims of larger companies. That's why small businesses fail so often. It appears Apple was unfair with GTAT, as big companies usually are. The GTAT COO is just telling it like it is, because he's. businessman.

GTAT is a small lost thumb-sucking baby in the big bad world of business! That is why they signed something they not only knew they could not deliver, but never intended to fulfill! The management scum insider traded the stock and profited better than investing in Apple! With business friendly bankruptcy laws, they were able to renege on their contract.

Well, it worked out well for Apple - imagine bend-gate with a crystal that won't get scratched, but will shatter to pieces! came out better with the Corning Gorilla glass!

 

[Frazzle]

Sure, GTAT shouldn't have signed this. But Apple shouldn't have made demands like this, especially if it's meant in the spirit of pioneering new materials/technologies. This kind of contract only creates resentment. It's probably indicative of the low-trust culture that pervades business these days.

That said, I did speak to someone at NXP who said that even though Apple's quality standards are incredibly high they do generally allow their suppliers to make a nice profit. Otherwise, there'd be no room for innovation and that puts Apple's business model of cleverly reusing and/or repurposing technology ideas from suppliers and others to create new and user-friendly products at risk.