Apple slaps suppliers with a $50 million fine for leaking secrets

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Photo: Michelangelo Carrieri/Flickr
Photo: Michelangelo Carrieri/Flickr

Apple’s bankrupt sapphire supplier GT Advanced Technologies might have stayed quiet about its reasons for the bankruptcy, but a few details are nonetheless starting to emerge.

Two of the most intriguing tidbits concerning the case regard the cost of sapphire production for GT Advanced Technologies, and the financial penalties Apple imposes on any supplier who leaks information about future products.

As per the Financial Times, GT Advanced Technologies claims its sapphire manufacturing facility in Mesa, Arizona, costs $1 million per day to run. It is for this reason that the company plans to shutter the plant by December 31, resulting in the loss of 890 jobs.

In terms of Apple’s heavy fines, it is reported that as part of the deal the supplier signed with Apple, GT had to agree to pay $50 million per breach of its “confidentiality obligations.”

Recently Apple has been trying to crack down on leaks in its supply chain. Earlier this year it was reported that Apple had enlisted the help of 200 security officers in China to catch anyone selling accessories, such as cases or schematics, to people in the media.

Of course, a supplier working with Apple shouldn’t be leaking information to begin with, but GT Advanced’s lawyers are likely trying to use information like this to bolster their case that Apple was an an “oppressive” company whose “contractual demands for secrecy” give it “disproportionate power” over suppliers, while also creating “significant logistical problems.”

Apple has reportedly turned to two other non-U.S. suppliers to provide the sapphire for its smartwatches (and perhaps future-generation iPhones.)

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  • Guest

    .

    • DigitalBeach

      Well said. Excellent point.

  • Guido

    It was in the contract that they chose to sign. If it is “oppressive” to adhere to the demands of one of the wealthiest companies in the world, don’t sign it. Complaining after you agreed to their demands is just petty.

    • Guest

      It isn’t quite as easy you make it seem like. These factories don’t have much choice. If they don’t accept the deal, Apple will just go to the factory next door that wants to produce their products for a cheaper price. And there they are with all with all their expensive machines and they can’t make money because the hundreds of other companies that are able to produce Apple’s products can do it for less. So they are forced to take the job.
      This is not a thing only Apple does. It happens all the time in China with every foreign company that wants to produce its products in China. But most people neglect that because they just want to have cheap products and the western companies just want to have great margins.
      If you want to defend your beloved product company you should know more about the case.

      • Wirehedd

        You frame it as if Apple was in the negotiations holding a gun to the head of some supplier. That’s utterly absurd to claim they were FORCED to sign anything. They are offered an opportunity on the conditions as laid out in the contract. They are perfectly aware of these obligations BEFORE they sign. They choose to sign then they also choose to abide by the contract they sign. They are not “forced” in any way.

        If they don’t want to abide by the contractual obligations they are perfectly free to say no and pass on the offer.

        They chose to sign and agreed to the conditions.

        Claiming they are forced to do ANYTHING other than abide the conditions they agree to is childishly absurd.

      • DigitalBeach

        I don’t believe that they were “forced to take the job.” I think they saw an opportunity to get in the Apple game and bit off more than they could chew. I think they overestimated their own ablities and now they are making up excuses.

      • JP

        It is quite that easy. That’s why it’s a contract. Unless Apple did something explicitly illegal in the contract then you have no merit in your point. If there were something illegal, then they could have simply sued and had the contract voided. However, they chose bankruptcy. The most obvious reason is they overestimated their ability to meet the demands. This isn’t about a “beloved product company”. And making a statement like that is just an ill gotten attempt to stifle a discussion because you have nothing intelligent to say or refute. This can be said about any and all contracts with any “insert company name here”.

      • sigzero

        Forced to take the job? Where in the world do you come up with that? Hey Samsung, LG, Nokia et al. we produce Sapphire glass come and get it. They aren’t forced to do anything.

      • font9a

        Seriously? GT was magically saddled with their tooling and machines and furnaces by some malevolent actor and forced to choose to do business with Apple?

  • Christopher Morris

    I wonder how much Apple is making from the Chinese suppliers who leak everything before launch. Is there a line on their balance sheet for this?

  • font9a

    Surely, *surely* someone at GT Advance read the contract before signing, and signing up to do the work, and said, “We can totes make sapphire and not tell the world about what we’re going to do next year!” And then they fire up the furnaces and start baking, and then someone says, “It’s too good to be true! We’re really making glass here! Shout it to the rooftops!”

    I’m sure it was a more complex scenario than above; but GT made a deliberate *choice* to do this work. No pity party for bad choices.

  • tralalalalalala37

    /cry apple wouldn’t let us leak info for $ /cry

  • Kr00

    Non disclosure agreements are common in almost every contract in almost every industry. Not only have GT broken that, the CEO has been conducting insider trading. I think we know who the bad guys are here.

  • sigzero

    Clickbait title. It makes it sounds like Apple has already done this and it isn’t just part of the contract companies sign with them.