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

[Swift]

The Chinese could do it

That's the truth of it. Here was Apple trying to seed a new manufacturing process in the United States. Former manufacturing leader in the world. Not Corning, because then everybody gets it. Who doesn't use gorilla glass? So where do you start? Well, how about a manufacturer of the furnaces? Loan them the money to buy enough furnaces, and try to get them going. US jobs. New tech, better (presumably) glass.

If they had been able to get it going, GT would be a major industry by sometime next year. It didn't work out, and who knows why? Anybody? Why didn't Apple just buy them and work on this process for the iPhone 7? Buy the company, assume the debt, fire the COO, and go!

 

[IJ Reilly]

If they had been able to get it going, GT would be a major industry by sometime next year. It didn't work out, and who knows why? Anybody? Why didn't Apple just buy them and work on this process for the iPhone 7? Buy the company, assume the debt, fire the COO, and go!

You answered your own question: if they had been able to get it going.

 

[Glideslope]

Enough of this BS.....

GT, You should have put on your "Big Boy Pants." A competent CEO would also have been beneficial. You want to play in the "Big Leagues?" Then you should have done your homework. Stop whining like a Pig in a Slaughter House.

 

[sainsburys]

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.

Instead of a success story, GT is an excellent example of what happens when journalists creates hype around rumor.

Everyone expected iPhone with sapphire screen. It didn't appeared so that's why GTAT stock was so low after iP6 premiere.

 

[tdtran1025]

It really proves that it does not pay to go to bed with Apple. Being a high class ********* has its price. You may look good in appearance, but you still lack dignity.
Besides, most people don't realize that Apple was convinced by Owens-Corning that Gorilla 3 glass performs well enough at a fraction of the cost of sapphire.
Bottom line, it was the bottom line.

 

[pubwvj]

Long ago I learned with my manufacturing company never to have any one customer that represented too much of my business because then they gained unwarranted control over me. That lesson in the 1980's has stood me well in the decades since. GTA should now learn that lesson well. Diversity has many values.

 

[rsocal]

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.

After investing almost $400 million for a failure, why you continue to puting money into it? Not sure Apple "screwed up" but it sure looks like GTAT did.

----------

It really proves that it does not pay to go to bed with Apple. Being a high class ********* has its price. You may look good in appearance, but you still lack dignity.
Besides, most people don't realize that Apple was convinced by Owens-Corning that Gorilla 3 glass performs well enough at a fraction of the cost of sapphire.
Bottom line, it was the bottom line.

*********s, ooh sweet! Now we're talking!

 

[SoAnyway]

I have to put my writer's cap on for a sec and comment on the article itself and say that it's poorly written, especially the last paragraph:

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.

There's something about the last paragraph that makes it sound like it came from an English 101 student rather than someone who's taken news writing classes.

Before anyone says anything, I'm not just some average forum member criticizing an article, my background is in communications. While journalism and writing wasn't my concentration, I was required to take numerous writing and journalism classes and can spot poor writing.

 

[macUser2007]

That's the truth of it. Here was Apple trying to seed a new manufacturing process in the United States. Former manufacturing leader in the world. Not Corning, because then everybody gets it. Who doesn't use gorilla glass? So where do you start? Well, how about a manufacturer of the furnaces? Loan them the money to buy enough furnaces, and try to get them going. US jobs. New tech, better (presumably) glass.

If they had been able to get it going, GT would be a major industry by sometime next year. It didn't work out, and who knows why? Anybody? Why didn't Apple just buy them and work on this process for the iPhone 7? Buy the company, assume the debt, fire the COO, and go!

LOL. Seriously?

First, the "ion-strenghtened" glass used on the iPhone 6 IS gorilla glass. Yep, gorilla-glass 3 is exactly this: ion strengthened glass. But Corning is not exactly friendly to Apple nowadays, so Apple can't use the trademark.

Apple has been throwing its weight around the industry for a while and now it's bearing fruit. The GTA deal WILL make it even harder for Apple to source, just like the Sharp deal made it harder a while back.

Apple ended up going to GTA because the larger players refused to do business with Apple.

Apple withheld payment from GTA, GTA called Apple's bluff, now Apple is trying to keep the terms hushed up, so it doesn't end up like the Sharp deal and poison future sourcing opportunities. But the cat's out of the bag already.

 

[z chamber]

Apple can, and does, drive a hard bargain. How anyone can claim this "paints a bleak picture of Apple" is beyond me.

Instead of bleak picture, how about sobering or cautionary tale? Driving a hard bargin is one thing. But stuff like this:

Instead, Squiller complains that Apple wouldn’t let GTAT’s staff choose the tools for working the boules, and that nearly a third of the staff’s time was spent interacting with a delegation from Apple from its supply chain, manufacturing and quality engineering team.

Apple’s refusal to have power backups for the furnaces led to some failures that held it up, Squiller argued.

http://www.theguardian.com/technology/2014/nov/14/sapphire-gt-advanced--brutal-apple-supply-chain

Seems like GTAT was getting squeezed from two ends.

 

[sailmac]

"...the High Stakes Risk of Becoming an Apple Supplier"

There are plenty of suppliers who are successfully managing their decisions to take the risks (and rewards) of doing business with Apple.

GT is not one of them. And they're not a particularly good example of how it generally goes.

Besides, it is a two-way street. Apple took high stakes risks in signing GT as a supplier. Both parties had a responsibility to recognize when risks became too great. Apple did not cross their own threshold, whereas GT obviously did.

Did Apple negotiate terms that adequately mitigated their risk? You bet!

Did GT negotiate terms that adequately mitigated their risk? Apparently not.

Interesting case study in how to bet the farm and lose. Evidence of GT's top execs cashing-in stock based on their insider knowledge certainly adds color.

 

[Mark Booth]

GT Advanced's Failure demonstrates nothing except the ability of a clueless COO (Daniel Squiller) to agree to deal he should have never agreed to in the first place. Squiller may have needed his "big boy pants" back then but he needs pampers now. And a case of facial tissue for all of the crying and whining he's been doing.

Mark

 

[FriednTested]

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

Then don't sign the canned contract as simple as that... So you want all the privileges and high quantity deals of working with a huge corporate and don't wanna use your brains or take any risks... So in short all you expect is easy money... Hmmm...

 

[Mescagnus]

Scratch galore

First, the "ion-strenghtened" glass used on the iPhone 6 IS gorilla glass. Yep, gorilla-glass 3 is exactly this: ion strengthened glass. But Corning is not exactly friendly to Apple nowadays, so Apple can't use the trademark.

(emphasis mine)

Ah, that might explain why — after only 1.5 months of very careful use — my iPhone 6 screen has more scratches on it than any of my previous iPhones had in their entire 1-2-year lifespans.

Case in point: I had the iPhone 5 for 2 years, and not a single scratch on the screen. I've been more careful with iPhone 6 due to the notorious bending rumors, and yet there are already four scratches on the screen.

I guess Corning did a number on Apple after all the saphire nonsense Either that, or the "ion-strenghtened" glass used on some batches of iPhone 6 is not Corning's gorilla glass at all.

This is sort of off-topic, but I've been wondering why Apple's quality has been going downhill in the past couple of years. Maybe they've p**sed off too many of their suppliers...

 

[2IS]

Apple makes Walmart look like an angel.

 

[IJ Reilly]

Instead of bleak picture, how about sobering or cautionary tale? Driving a hard bargin is one thing. But stuff like this:

These are GT's contentions, so I would take them with a grain of salt. The implication that Apple somehow wanted to this joint venture to fail makes no sense on its face, if only because they had plenty of skin in the game.

 

[bawbac]

That's the truth of it. Here was Apple trying to seed a new manufacturing process in the United States. Former manufacturing leader in the world. Not Corning, because then everybody gets it. Who doesn't use gorilla glass? So where do you start? Well, how about a manufacturer of the furnaces? Loan them the money to buy enough furnaces, and try to get them going. US jobs. New tech, better (presumably) glass.

If they had been able to get it going, GT would be a major industry by sometime next year. It didn't work out, and who knows why? Anybody? Why didn't Apple just buy them and work on this process for the iPhone 7? Buy the company, assume the debt, fire the COO, and go!

Apple setup them up for failure and they know it.
It's like a bank giving you money to start a business but the bank is a key part of making your business successful.
Then the bank doesn't own up to its promises and you are stuck holding a failed business.

Apple will be buying all equipment and intellectual properties at the liquidation sale. This is loads cheaper & they can own the process.

 

[z chamber]

"...the High Stakes Risk of Becoming an Apple Supplier"

There are plenty of suppliers who are successfully managing their decisions to take the risks (and rewards) of doing business with Apple.

GT is not one of them. And they're not a particularly good example of how it generally goes.

Besides, it is a two-way street. Apple took high stakes risks in signing GT as a supplier. Both parties had a responsibility to recognize when risks became too great. Apple did not cross their own threshold, whereas GT obviously did.

Did Apple negotiate terms that adequately mitigated their risk? You bet!

Did GT negotiate terms that adequately mitigated their risk? Apparently not.

Interesting case study in how to bet the farm and lose. Evidence of GT's top execs cashing-in stock based on their insider knowledge certainly adds color.

In fairness to GTAT, all of Apples other suppliers (Samsung, LG, Sony, Corning, etc.) absolutely dwarf GTAT in size and money. They can afford to take hits that would kill smaller companies. Risk doesn't affect them the way it affects GTAT. Furthermore these other component makers work on their own equipment, not on ones Apple chooses.

While both parties accepted risk in this deal, please don't act like the risk to Apple was anywhere near proportional to the risk taken on by GTAT.

Evidence of GT's top execs cashing-in stock based on their insider knowledge certainly adds color.

Really insider trading? Care to show proof?

 

[2IS]

If GT was successful? Apple benefits
If GT was unsuccessful? Apple benefits

Sounds like a fair deal.

 

[IJ Reilly]

There's something about the last paragraph that makes it sound like it came from an English 101 student rather than someone who's taken news writing classes.

Before anyone says anything, I'm not just some average forum member criticizing an article, my background is in communications. While journalism and writing wasn't my concentration, I was required to take numerous writing and journalism classes and can spot poor writing.

If you get into reading MR articles for grammar, style, and sense, you will make yourself a little crazy. In any given day you'll find enough spilt infinitives, run-on sentences, incorrect word usages, and random punctuation to last a lifetime. This paragraph was hardly the worst of it. I point out some of the most obvious errors (everybody needs a hobby), but none of it is ever fixed. I've seen it enough to become convinced that nobody at MR is the least bit embarrassed by the poor quality of the writing.

 

[ProfessorHenry]

I've seen it enough to become convinced that nobody at MR is the least bit embarrassed by the poor quality of the writing.

I here you.

 

[Max(IT)]

A company overpromising and underdelivering, looking for a big deal and now whining about the big, bad boy Apple.
They weren't forced to sign an agreement.
Period.

 

[darkplanets]

****** contract terms? Possible.
Strong-arming smaller businesses/suppliers? Possible.

Regardless, GT signed the contract at the end of the day. Whether it was a ****** contract under pressure or not, it doesn't change the outcome of the situation -- they willfully agreed to the terms and conditions and failed to meet the required milestones. That puts the brunt of the blame on GT, regardless of how ****** Apple may or may not have behaved during the negotiations process.

 

[z chamber]

These are GT's contentions, so I would take them with a grain of salt. The implication that Apple somehow wanted to this joint venture to fail makes no sense on its face, if only because they had plenty of skin in the game.

I'll take GTAT's contentions with a grain of salt if you promise to take Apples reply to GTAT's contention with an equal amount of salt. Deal?

The implication that Apple somehow wanted to this joint venture to fail makes no sense on its face, if only because they had plenty of skin in the game.

I've read a number of statements on these threads echoing that same sentiment. I always feel like they're a bit of a false argument.

I never said that Apple wanted GT to fail.

I never said that Apple intended for GT to fail.

I do think that if GT was put into a bad enough situation by a "bait and switch"contract, it did lead them into bankruptcy.

I'm not try to get into a semantic argument here. If I shoot you, I intend for you to die. If I get drunk and accidentally run over you, even if it was never my intention nor my wish for you to die, your death is still on my hands. No?

 

[IJ Reilly]

I here you.

Their you go again.