AI totally lost me by including the dum dums at GT Advanced Technologies in the article. They and other suppliers bit off much more than they could chew and Apple did right by the terms of their contract sand business principles (not to mention shareholders) by going elsewhere. Nothing illegal. Nothing unethical.
Yup, here’s what I wrote about GTAT, adding a bit of color from an investor’s point of view, back when this occurred…
GT Advanced Technologies (GTAT), a maker of solar manufacturing equipment, is an example of a speculative bet, and one that went terribly wrong for those who made that bet. In 2012 and 2013, GTAT saw its solar business collapse under the weight of competition from Chinese manufacturers. Late in 2013, GTAT partnered with Apple to manufacture sapphire display glass, presumably for use on the iPhone 6. GTAT needed that partnership to go well; it represented GTAT’s lifeline to a corporate reboot, a chance to reinvent itself in a new line of business in which it had little experience. That reinvention, if successful, would materially enhance the value of the company. If a failure, it would mark the collapse of GTAT as a viable business. GTAT did fail, and filed for bankruptcy protection. In the process, the share price went from a high of about $20 to about 40 cents. Many of those holding the shares indignantly complained in online forums that their investment was wiped out by unscrupulous actions of GTAT's CEO and management team. They weren’t wrong about the actions of GTAT’s management, but they were wrong in characterizing their GTAT holdings as an investment. These people were speculating and paid a high price.
Apple has for many years invested in manufacturing technology that goes into the factories of its 3rd-party suppliers and assemblers. An example from the early MacBook Air era is the 25 holes laser-punched into the screen bezel to allow light from an LED mounted behind the bezel to pass through. This light is used to indicate that the webcam is ON. With the indicator light off a casual observer cannot see the holes; they are too small and so the bezel looks to be solid aluminum in that spot. Only when the camera indicator light is turned on does the magic become evident and a part of the seemingly solid aluminum bezel illuminates.
The equipment needed to punch these micro laser holes did not exist at the time the MacBook Air was designed, so Apple had to invent it and install it at its MacBook assembler, at a cost of $250,000 each. This is a good example of Apple investing into their manufacturing partners while retaining rights and ownership of the technology needed to manufacture Apple products.
So let's see. Apple partners with a company to develop X that company cannot deliver and wants to renegotiate terms that benefit them with no promise that the change in terms will allow them to succeed. Yet, somehow when Apple takes their IP, yes their IP, they paid the pervious vendor, that second vendor is able to succeed?
If you don't like the terms or don't think you can deliver then don't sign. It's their greed to cash in on the Apple supplier train that made them think they could when they knew they couldn't.
Why doesn't the first vendor do a deal with the cheaper vendor themselves and use them as a resource to keep the contract out of dispute and keep the margins higher?
Ethical? No, but if Apple was paying the supplier while that supplier developed the process or technique, then one can say that Apple does own it, and the contract supports that.
As a software engineer, I experience this all the time with clients. They can't see the grey areas between their product and my technology solutions developed in-house.
How is it not ethical when a company, like GT Advanced Technologies Sapphire, have failed to meet the requirements that Apple expected from them, especially when Apple invested a significant amount of money in it? I don't think GT did a good job - likely GT hired a lot of slackers who didn't have the skills to develop the process. That's the unethical part of GT, not Apple. What do you expect Apple to do, let the process go unused when there is a supplier that can actually produce results from the process?
I can somewhat understand smaller companies getting suckered but I would expect Samsung and Sony to be smarter than that.
The article says Sony refused to expand production, so I guess they were smarter than that.
Clearly many people and corporations believe ethics have no place in business. It's true the devil is in the business details. Any company can read a contract. That's why they have lawyers. Making your business succeed or fail because of one customer is asking for trouble.
Apple, like many other corporations didn't get rich by being nice guys, models of ethical behavior. They made it with the help of many business practices being legal, in most cases, and by legal practices some of us would call unethical.
Apple is an 1000 pound gorilla in a corporate world of 800 pound and smaller gorillas. If a person or corporate entity has a reputation for not treating their partners fairly under ethics or laws, as with a notable political figure notorious for not paying bills, then anybody doing business with that person or entity invites a certain level of risk.
I don't give Apple a pass for their shark-tank behavior. But I also blame the victim to some degree when "you knew I was a scorpion when you gave me a ride".
Apple is not a warm and fuzzy company. Business is not warm and fuzzy. You're a company that could catch a huge break getting Apple as a customer. You should know the risks. If you can't negotiate a contract that protects you as much as Apple, then don't sign, or halt and catch fire.
It was a long article. So when you say "It", it's hard to know exactly which "It" in the article you are referring to. Hopefully you are not referring to the idea that Apple is switching to lower-priced suppliers when the contract is up. Hopefully you are not objecting to capitalism or contract law.
That’s no bueno. What about patents? Surely that tech is covered by patents so other companies must license it?
Nothing new. After iPhone 4S, the camera lens could be better if Apple were willing to pay a little bit more. Instead, Apple chose to give iphone users inferior lens from another supplier and thus made the superior lens useless. After that, Samsung and Huawei took better images for years.
Comments
GT Advanced Technologies (GTAT), a maker of solar manufacturing equipment, is an example of a speculative bet, and one that went terribly wrong for those who made that bet. In 2012 and 2013, GTAT saw its solar business collapse under the weight of competition from Chinese manufacturers. Late in 2013, GTAT partnered with Apple to manufacture sapphire display glass, presumably for use on the iPhone 6. GTAT needed that partnership to go well; it represented GTAT’s lifeline to a corporate reboot, a chance to reinvent itself in a new line of business in which it had little experience. That reinvention, if successful, would materially enhance the value of the company. If a failure, it would mark the collapse of GTAT as a viable business. GTAT did fail, and filed for bankruptcy protection. In the process, the share price went from a high of about $20 to about 40 cents. Many of those holding the shares indignantly complained in online forums that their investment was wiped out by unscrupulous actions of GTAT's CEO and management team. They weren’t wrong about the actions of GTAT’s management, but they were wrong in characterizing their GTAT holdings as an investment. These people were speculating and paid a high price.
Clearly many people and corporations believe ethics have no place in business. It's true the devil is in the business details. Any company can read a contract. That's why they have lawyers. Making your business succeed or fail because of one customer is asking for trouble.
Apple, like many other corporations didn't get rich by being nice guys, models of ethical behavior. They made it with the help of many business practices being legal, in most cases, and by legal practices some of us would call unethical.
Apple is an 1000 pound gorilla in a corporate world of 800 pound and smaller gorillas. If a person or corporate entity has a reputation for not treating their partners fairly under ethics or laws, as with a notable political figure notorious for not paying bills, then anybody doing business with that person or entity invites a certain level of risk.
I don't give Apple a pass for their shark-tank behavior. But I also blame the victim to some degree when "you knew I was a scorpion when you gave me a ride".
Apple is not a warm and fuzzy company. Business is not warm and fuzzy. You're a company that could catch a huge break getting Apple as a customer. You should know the risks. If you can't negotiate a contract that protects you as much as Apple, then don't sign, or halt and catch fire.