GT Advanced Saw Production Troubles as Early as February

[Makosuke]

Definitely seems to support my point that the photovoltaic industry crashing last year seemed to push them to desperate terms with Apple.

This is very true (and completely orthogonal to the hypothetical points I was making about taking big risks with the potential for big payoffs); all the discussions here are overlooking entirely what condition GT Advanced was in prior to the Apple deal, and seem to generally be assuming that things were going fine for them. Looking purely at their bottom-line numbers and where their income was coming from (their quarterly statements dating back to 2008 are all published on the web and easy to read), 2013 was a catastrophe for the company.

Their statements claimed that the PV industry was improving and the sapphire industry was looking big, but the fact is that their stock was in the toilet, sales were down 70%, and they were losing money did not point to a company doing particularly well.

Might they have recovered based on cutbacks and slow growth from sapphire technology? Sure. Might they have downsized to a smaller company and survived as something smaller? Maybe.

But it's also entirely possible that the company was on its way to slow bankruptcy and the executives didn't have any faith that they could get other businesses up to speed before they ran out of money. In which case it could have been an all-or-nothing gamble where the only alternative was bankruptcy anyway.

From that perspective, it's not even that big of a gamble--it was just a last-ditch save-the-company gamble. None of which absolves them from the questionable behavior of trying to ditch their stock once things started looking ugly a few months later.

 

[grahamperrin]

… photovoltaic …

Pause for a moment. What a lovely word.

 

[azeoflash]

Might they have recovered based on cutbacks and slow growth from sapphire technology? Sure. Might they have downsized to a smaller company and survived as something smaller? Maybe.

I'm not sure whether they would have been able to cut costs fast enough to stabilize their company. However, the way it's been reported lately with GT trying to get out of sapphire business altogether, it's likely that their other businesses have stabilized in these 10-11 months. If and when they come out of bankruptcy, it seems like they will be able to survive.

However, in Apple's case, missing deadlines is deadly because of the raising fixed costs of maintaining their assets in the Arizona plant while they try to improve their product. After all, missing the iPhone 6 deadline means adding another year before they get paid by Apple for their product. Meanwhile, they have to continue to pay for their ovens and their personnel.

 

[Michaelgtrusa]

GT Advanced stock delisted from NASDAQ http://www.macnn.com/articles/14/10/16/supplier.says.it.wont.appeal.decision/

 

[OatmealRocks]

A RARE Apple FAIL.

No. More like YEEHAWWW BRING BACK MANUFACTURING back in the US of A (cause we do it better) FAIL.

 

[kdarling]

Yes, I would. Again, the payoff is spectacular--you would be the primary, perhaps exclusive supplier of cover material for the most popular electronic device on the planet.

Which is likely to push other device manufacturers to want to buy your furnaces as well (which Apple's agreement did not prevent them from selling--it was only product from that factory).

It looks like it was way more exclusive than that.

Read the SOW between Apple and GTAT:

"9.1.1 neither GTAT, nor any GTAT Related Entities, will directly or indirectly, without Apple’s express written permission:
(i) supply to any entity (other than Apple) any [***], nor
(ii) license to any entity (other than Apple) [***] nor
(iii) provide services [***] to any entity (other than Apple) or otherwise enable any such entity to use or produce sapphire goods (whether for the benefit of such entity or for any third party), in each case for use in or in connection with Consumer Electronics Products;"

Along with other paragraphs, it looks like Apple had an exclusive on anything GTAT did with respect to materials or IP, that would in any way enable sapphire to be made or used for Consumer Electronics by anyone else.

(Apple's deal with Liquid Metal Technologies is similar, in that Apple has exclusive rights to any current IP with respect to use in Consumer Electronics. I wonder if LM regrets this deal as well. LM was being used more and more in consumer electronics, especially by Samsung. Even luxury phones were made from LM before Apple got their exclusive. Now the high end phones are titanium instead.)

 

[Makosuke]

"9.1.1 neither GTAT, nor any GTAT Related Entities, will directly or indirectly, without Apple’s express written permission:
(i) supply to any entity (other than Apple) any [***], nor
(ii) license to any entity (other than Apple) [***] nor
(iii) provide services [***] to any entity (other than Apple) or otherwise enable any such entity to use or produce sapphire goods (whether for the benefit of such entity or for any third party), in each case for use in or in connection with Consumer Electronics Products;"

Ah, good catch on that; so the theoretical light at the end of the tunel may not have included sales of furnaces to other consumer electronics manufacturers (although that doesn't seem to quite jibe with some of what's been reported to date). It would still result in a whole heck of a lot of business with Apple (importantly, you'd want to do the math on what percentage of high-end phones are made by Apple, not just what percentage of cell phones, since that's your potential market).

Depends, again, on what you think the eventual market size for sapphire is. If it's eventually going to explode, maybe you wouldn't want to do this. (Of course, if you're going to go out of business before then due to other market crashes, as discussed, that's completely irrelevant.) If you think it's going to remain limited to the top end of the market, getting in good with the company that dominates the top isn't that bad of a situation.