Apple's supplier contracts include $50M penalty for leaking future product info

Posted:
in General Discussion edited October 2014
Details from Apple's supplier non-disclosure agreements are beginning to leak thanks to the bankruptcy proceedings of GT Advanced Technologies, with the sapphire maker arguing that even more should be published so creditors and shareholders can see the full story behind its fall from grace.




Court filings made by GT Advanced Technologies have already revealed that Apple imposes a $50 million penalty "per occurrence" for leaking any information about an upcoming, unannounced product. The fine was first reported on Monday by the Financial Times.

Even more could come to light as GT Advanced's bankruptcy proceedings carry on, as the company argued in court last week that even more information about its relationship with Apple should be published. The company also hinted that the terms of Apple's contract were unreasonable, referring to them as "oppressive and burdensome."

In the filing, GT Advanced noted that even the confidentiality agreement between the two companies is identified as "confidential." It has asked for permission to disclose the details of its agreement in the interest of creditors, equity holders and other stakeholders, as well as "to ensure an open, transparent and fair process."

GT Advanced entered into a $578 million deal with Apple a year ago for advanced sapphire supplies. The scratch-resistant material is used on the iPhone to protect the Touch ID fingerprint sensor as well as the rear camera lens, and it will also be found on two of three Apple Watch models next year.

The sapphire maker announced one week ago</> that it had filed for bankruptcy -- a move that came as a major surprise, even to Apple. GT Advanced plans to close its plants in both Arizona and Massachusetts, which could cost a total of 890 jobs, though Apple has said its focus is on preserving the jobs it helped create in Arizona.

Apple designed and built the facility in Mesa, Ariz., and was to lease it to GT Advanced, which would use it to manufacture sapphire for the iPhone, Apple Watch, and potentially other future products. The agreement was reached in cooperation with state officials, who awarded tax breaks in return for the creation of jobs.
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Comments

  • Reply 1 of 109
    slurpyslurpy Posts: 5,385member
    "In the filing, GT Advanced noted that even the confidentiality agreement between the two companies is identified as "confidential." It has asked for permission to disclose the details of its agreement in the interest of creditors, equity holders and other stakeholders, as well as "to ensure an open, transparent and fair process."

    And people get all up in arms about leaked parts from China? At least Chinese companies don't bitch about confidentiality agreements.
  • Reply 2 of 109
    prokipprokip Posts: 178member
    There is a point at which it should be said by any reasonable person, 'Apple, you have gone too far'.

    OK now for the flame. Go fellas !
  • Reply 3 of 109

    Wah wah wah. If they thought the agreement was unfair, why did they sign it in the first place?

  • Reply 4 of 109
    rp2011rp2011 Posts: 159member
    Before entering an agreement is when one should cry foul, not after you had the cake and ate it.
  • Reply 5 of 109
    @prokip
    No Flame, just asking you to justify that statement, please give a argument to represent how you came to state that.
    Am genuinely interested in your opinion on it
  • Reply 6 of 109
    damonfdamonf Posts: 229member
    I wonder if Apple has considered buying GT Advanced, to make all this go away. Or maybe that's what GT Advanced is trying to pressure them to do behind the scenes.
  • Reply 7 of 109
    damonfdamonf Posts: 229member
    Quote:

    Originally Posted by prokip View Post



    There is a point at which it should be said by any reasonable person, 'Apple, you have gone too far'.



    OK now for the flame. Go fellas !

     

    There is no argument that GT Advanced is responsible for signing the contract with Apple.  I don't think anyone at Apple held a gun to GT management's heads to force them into signing it.  If it was too burdensome, they shouldn't have signed it to begin with. 

  • Reply 8 of 109
    dugbugdugbug Posts: 283member
    Quote:

    Originally Posted by prokip View Post



    There is a point at which it should be said by any reasonable person, 'Apple, you have gone too far'.



    OK now for the flame. Go fellas !

     

    NDAs and confidentiality agreements, including penalties, are common.  I see nothing unreasonable about this.  If you are a part supplier you are privy to product plans well in advance

  • Reply 9 of 109
    icoco3icoco3 Posts: 1,474member
    Quote:

    Originally Posted by sog35 View Post

     

    GTAT executives are CROOKS and FRAUDS.

     

    All they are doing is trying to get better terms from Apple.

    No one forced them to sign the contract.  Its not Apple's fault that the company is incompetent and unable to product good product.  What do you expect?  Apple to buy Billions of dollars of defective product?

     

    The GTAT CEO deserves to go to jail.  He made BIG PROMISES to Apple and GTAT investors and failed.  Please remember that before the Apple deal the GTAT stock was $4 per share.  After the Apple deal the stock blew up to $20.  Because of this the GTAT CEO made huge money selling stock options.  He made $10,000,0000 because of the stock exploding.

     

    It looks like the GTAT CEO signed the Apple contract because he knew it would look great to Wall Street and that would cause the stock price to explode.  Then his stock options would EXPLODE in value and he would become rich.  He didn't care if this risk would cause the company to get BANKRUPT because he still would get his $10,000,000.


     

    I wonder how many would admit they would have the same thoughts if in that position....

  • Reply 10 of 109
    prokipprokip Posts: 178member
    Quote:

    Originally Posted by seanie248 View Post



    @prokip

    No Flame, just asking you to justify that statement, please give a argument to represent how you came to state that.

    Am genuinely interested in your opinion on it



    There is a lesson that was taught to me by a very successful investor, (he wasn't a Warren Buffett, but still very impressive). - When you set out to make a profit, don't take it all for yourself, leave something for the next guy. The 'next guy' remembers what you did and he will want to deal with you again.

  • Reply 11 of 109
    Quote:

    Originally Posted by AppleInsider View Post









    "In the filing, GT Advanced noted that even the confidentiality agreement between the two companies is identified as "confidential."

    ….and can only be read by either party or their lawyers….under the Cone of Silence"

  • Reply 12 of 109
    prokipprokip Posts: 178member
    Quote:

    Originally Posted by Dickprinter View Post

     

    ….and can only be read by either party or their lawyers….under the Cone of Silence"




    Confidentiality agreements cannot be kept away from a court's consideration in most common law jurisdictions of the world  (the US is such a jurisdiction).

  • Reply 13 of 109
    Who forced GTAT to sign the contracts? If the contract was oppressive they should not have agreed to it.
  • Reply 14 of 109
    herbapouherbapou Posts: 2,228member

    GTAT looks like a bunch of incompetent fools or they are fraud at best.  They got millions from Apple and can't deliver...  Maybe they promised something they can't do.

  • Reply 15 of 109
    sog35 wrote: »
    Explain.

    Apple gave GTAT $500M to product product.
    GTAT failed to make product that was not defective.
    Apple is under NO OBILIGATION to pay for defective product.

    I'm just curious where this whole defective product portion you keep talking about comes into play? I haven't seen that published anywhere yet.. Can you tell me where you've did discovered gtat's products were defective? That's newsworthy if accurate.
  • Reply 16 of 109
    jungmarkjungmark Posts: 6,926member
    prokip wrote: »

    There is a lesson that was taught to me by a very successful investor, (he wasn't a Warren Buffett, but still very impressive). - When you set out to make a profit, don't take it all for yourself, leave something for the next guy. The 'next guy' remembers what you did and he will want to deal with you again.

    $600 MM wasn't enough for GT? If not, it shouldn't have signed the contract.
  • Reply 17 of 109
    maestro64maestro64 Posts: 5,043member

    For those who do not work for a High Tech Company and never signed and NDA, this is not unusual, there is always a penalty like this if leaking information the size of the penalty is usually associated with the size of the business you doing with them or perceived value of the information that is being shared. The bigger the number the more teeth the agreement has. This ensure Management tells it employee they can not speak to anyone about what they are doing. BTW the federal government and Military contractors have something similar but it includes jail time.

     

    The fact so much leaked out ahead of the i6 and nothing about the watch tells me that apple allowed the i6 information to leak since non of their suppliers are going to risk paying apple $50m for each leak. Most NDA have a cost for each leak, to it not like you can leak 10 things and get hit once for $50M it going to $50M for each of the 10 leaks so $500M.

     

    I believe Apple allowed the leaks to hold people who may have been considering a move to Samsung, there was too much specific information leaking out about the form factor. If Apple did do this, then it work since we know Samsung took a big hit.

  • Reply 18 of 109
    mubailimubaili Posts: 454member
    damonf wrote: »
    There is no argument that GT Advanced is responsible for signing the contract with Apple.  I don't think anyone at Apple held a gun to GT management's heads to force them into signing it.  If it was too burdensome, they shouldn't have signed it to begin with. 
    maybe Apple employed Luca Brasi and made an offer to GT Advanced that they cannot reject.
  • Reply 19 of 109
    Quote:

    Originally Posted by sog35 View Post

     

    It looks like the GTAT CEO signed the Apple contract because he knew it would look great to Wall Street and that would cause the stock price to explode.  Then his stock options would EXPLODE in value and he would become rich.  He didn't care if this risk would cause the company to get BANKRUPT because he still would get his $10,000,000.


     

    That's the "moral hazard" of publicly held companies. The executives can make decisions that provide personal enrichment short-term and expose the company to bankruptcy. Most obvious example: many of the large banking and financial companies during the real estate bubble.

  • Reply 20 of 109
    MacProMacPro Posts: 19,778member
    prokip wrote: »
    There is a point at which it should be said by any reasonable person, 'Apple, you have gone too far'.

    OK now for the flame. Go fellas !

    So roughly a 10% penalty on the contract in this case. Can you explain why that seems 'too far'?
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