Apple and its former sapphire supplier GT Advanced Technologies have stayed quiet about their disastrous relationship, but newly unsealed court documents reveal that the two companies never had a chance of making things work.
Judge Henry Boroff ordered the sealed documents to be opened on Tuesday, and one of the affidavits from GTAT CEO Daniel Squiller claims Apple used a “bait-and-switch” strategy that was massively one-sided. When GTAT balked at Apple’s terms, execs were told to stop trying to negotiate and “put on your big boy pants and accept the agreement.”
The original deal with GTAT was for Apple to purchase a number of sapphire furnaces and then have GTAT operate them. The deal was eventually changed to something “fundamentally different” and required GTAT to purchase all the furnaces and assume all the debt in a new deal that was “onerous and massively one-sided.”
GTAT says they still went through with the deal because they lost business waiting to land the big Apple contract and were barred from talk to competitors. Apple basically assumed de facto control of the sapphire plant in Arizona, even though GTAT was financially liable for it. Things eventually got so strained between the two companies that Apple had to remind its employees to not order GTAT employees around.
Apple paints its side of the story a bit differently in filings, claiming it “bent over backwards” to help GTAT get their sapphire operations running.
“Apple has paid the Debtors $439 million and additionally spent in excess of $700 million in connection with the transaction despite receiving from the Debtors sapphire that was only a small fraction of the Debtors’ original commitment. Far from the villain in these chapter 11 cases, Apple is the largest victim of the Debtors’ failure to perform under the agreements it negotiated at arms’ length and with advice of counsel.”
Apple has expressed its desire to continue working with GTAT to bring sapphire glass to its customers, but GTAT says it’s getting out of the sapphire business altogether. Rather than waste the hundreds of millions invested into the plant, Apple is looking to repurpose the Mesa factory, or have another company come in and take over.
You can read GTAT’s unsealed affidavit below:
GT Advanced COO Affidavit by rsgnl
Buster Hein is a freelance writer who lives in Phoenix, Arizona. Twitter: @bst3r.
14 responses to “Court docs reveal how Apple treats its suppliers (badly)”
While I have no sympathy for GTAT, they took a gamble and it didn’t pay off, I completely believe their version of events over Apple’s.
“GTAT says they still went through with the deal because they lost business waiting to land the big Apple contract and were barred from talk to competitors.”
Lost business is sunk cost you will never recover. Sounds like GTAT were in over their heads. I see SEC investigation on inside trading in their future.
I guess the execs at Corning (Gorilla Glass) bought a truck load of champagne.
They probably used GTAT sapphire for the bottles.
It looks like GTAT played both sides of the fence when they put all their eggs in a basket and then cashed in by selling stock the day before their house of cards crashed. I see a stay in the grey bar hotel in their future. Apple played hardball because they can, everyone would love to jump on the Apple bandwagon.
Wow GTAT = hindsight is 20-20. After reading the court filings i find it hard to believe any competent persons would agree to these terms.
Especially, GtAT said that apple’s specs for the sapphire was always in flux, and there was no commitment from apple to buy the sapphire.
This guy is either incompetent or lying, who knows since he and his CFO are now being investigated by the SEC. Good Luck getting another job
This is probably how business like this goes on in China. I wonder if something like this wouldn’t have happened in China. IDK, just wonder.
No, this doesn’t happen in China or anywhere else in Asia. Apple contracts with Foxconn, Samsung, Taiwan Semiconductor and others and no, they don’t all fold because Apple “treats them badly”. These companies won’t sign a contract they can’t fulfill. Why is it so difficult to think these companies can’t read a contract??? GTAT knew exactly what they were signing. They knew they wouldn’t be able to fulfill the orders but they signed the contract anyways, nobody put a gun to their head.
Incidentally Foxconn will be making record profits because they have been able to fulfill Apple’s orders for iP6, despite the fact they have been stretched to their physical and technical limits. Apple pushes their suppliers, yes, but it’s for the benefit of both parties. GTAT simply showed us what kind of business people they are.
They (GTAT) had counsel present. No one held a gun to their heads to sign the contract [with AAPL]. If there was spec creep, and it wasn’t allowed for in the agreement, then they could (note the past tense) have “put on those big boy pants” and sought recourse long before they saw the writing on the wall and started selling off stock (possibly illegally) before ultimately declaring bankruptcy. Spec creep is almost always expected, and I suspect companies renegotiate when that happens (I’m an engineer, not a corporate lawyer, so I got to see the end result of changing specs, sometimes being the source of pushing back on the customer (who we were contracted with)).
Having held clearances from both DOD and corporate NDAs, the confidentially agreement it doesn’t seem to be out of the ordinary.
If these GTAT guys dont shut up, Apple will never make big bets like this with American suppliers again.
Contracts are not made of invisible ink, as pointed out in an earlier post in favor of Apple. You sign a contract you deliver, and if you can’t you don’t cry about it and call foul. Don’t sign a contract if you can’t deliver under its terms, and if you can’t take your ball and go home with your head hung low and take a long look I the mirror. This whole dialogue is so tiring. You don’t perform you don’t get paid, what’s to debate. It’s called business, and hopefully the SEC teaches the GTAT a lesson. Fire your contract lawyer.
I look at other businesses like Foxconn who make massive deals with Apple and they manage to make it work despite the fact they have to work their tails off and push the limits. These “one sided” deals with Apple force the other company to work hard and demand the most out of themselves and their employees. GTAT wasn’t up to the task. Apple contracts with thousands of companies to source their batteries, screens, processors, and misc parts.
Since when is being demanding an evil thing? Also, the bit about GTAT signing the deal anyways because they were waiting for “the big contract” to happen was complete B.S. They took a gamble they knew probably wouldn’t pay off and made a very poor decision. Nobody put a gun to GTAT’s head and forced them to sign the contract. They are adults with lawyers and analysts at their disposal so it’s not as if they were not informed.
The title of this article is also pure B.S. Have you seen how much money Foxconn made last quarter? Yea I’m sure Apple treats Foxconn badly, not! Foxconn is setting records for profits. Yes, Apple is very demanding, but the rewards can be incredible. That’s the carrot.
Fact of the matter is, GTAT is based in Salem, Massachusetts. People on the east coast don’t know how to think long term success. There are zero successful starts ups in the northeast, and it’s because they are extremely cynical and self serving. They sacrifice $10 for tomorrow so they can make a $1 today. All the successful tech companies, the Google’s, Yahoo’s, Apple’s, Facebook’s, Microsoft’s, Qualcomm’s, are on the west coast.
Why do you think Facebook couldn’t make it work on the east coast? Zuckerberg wanted to make a go. They couldn’t raise a dime in NYC. Nobody wanted to take a risk on an unproven venture. Enter Peter Thiel from Silicon Valley and the rest is history.
All the successful partners are either on the west coast or in Asia. In other words, the Pacific Rim.
Not to justify gtat but what workers in China get/expect is a hell of alot different than in the U.S China’s manufacturers can let the burden fall on their workforce to “get the job done” it happens here in america too but not to the extent factories have to put up suicide nets.
Foxconn employs over 800,000 workers, all of whom live on the Foxconn campus. It’s roughly the same size as the city of Columbus Ohio. How many suicides do you think happen annually in the city of Columbus? It’s more than the dozen or so that have happened at Foxconn over the years. Your comment doesn’t hold any water.