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Sapphire supplier accuses Apple of bait-and-switch as details go public

Gregg Keizer | Nov. 10, 2014
Apple's former sapphire supplier, GT Advanced Technologies, accused its ex-partner of bait-and-switch tactics during 2013's negotiations, claiming that Apple pressured it into signing contracts by telling it to "Put on your big boy pants," court documents released Friday said.

Apple's former sapphire supplier, GT Advanced Technologies, accused its ex-partner of bait-and-switch tactics during 2013's negotiations, claiming that Apple pressured it into signing contracts by telling it to "Put on your big boy pants," court documents released Friday said.

The Oct. 8 filing with a federal bankruptcy court had been under seal until Friday. Both Apple and GT had previously demanded that the declaration by GT chief operating officer Daniel Squiller remain secret, but U.S. Bankruptcy Judge Henry Boroff disagreed, and last week ordered that virtually all information be made public on Friday.

"With a classic bait-and-switch strategy, Apple presented GTAT with an onerous and massively one-sided deal in the fall of 2013," Squiller said. "Apple simply dictated the terms and conditions of the deal to GTAT."

Apple contested Squiller's characterizations of the negotiations, the contracts, and the attempted production of sapphire prior to GT's sudden financial collapse and filing for Chapter 11 protection. Apple's lawyers used words such as "inflammatory," "untrue" and "slanderous" to describe GT's account.

"These statements are intended to vilify Apple and portray Apple as a coercive bully," Apple's lawyers said of Squiller's declaration in an October motion meant to quash its disclosure. "Apple's image and reputation will be harmed if the defamatory statements alleging that Apple sought to dominate and control, strong arm, or take advantage of its suppliers are disclosed."

In October 2013, GT and Apple struck a deal under which the former would produce sapphire at an Apple-owned Mesa, Ariz. plant. Apple agreed to loan GT $578 million so the company could equip the factory with sapphire-growing furnaces to produce large amounts of the material. The scratch-resistant sapphire was intended to replace the reinforced glass that had covered earlier iPhones' touchscreens.

The deal unraveled this summer and fall because of cost overruns, production issues and Apple's interference, costing GT nearly a billion dollars. Merrimack, N.H.-based GT filed Chapter 11 on Oct. 6.

GT blamed its meltdown on Apple's draconian contract stipulations and obsessive micro-management, but offered little explanation for why it signed on the dotted line even after it recognized Apple was playing tough.

Apple's initial proposal, said GT, was to purchase 2,600 sapphire-growing furnaces, "the company's largest sale ever," but deep into negotiations Apple changed the game. Under the new deal, Apple would lend GT $578 million so that the latter could buy the necessary parts to assemble furnaces, then produce and fabricate the material. "The structure would allow Apple to purchase sapphire material from GTAT at below market value," GT claimed (download PDF).

"In hindsight, it's unclear whether Apple ever intended to purchase any sapphire furnaces from GTAT," Squiller said.

 

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