GT Advanced blames Apple for one-sided sapphire contract that resulted in $461M loss

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  • Reply 81 of 91
    Quote:

    Originally Posted by airmanchairman View Post



    It wouldn't surprise me if, in their desperation to beat off better-performing rivals and win Apple's order, GTAT themselves offered up those incredibly stiff conditions.



    Always looking to minimise cost and maximise margins, Apple predictably jumped at GTAT's apparent willingness to shoulder financial responsibility for the order. But for my money, the stock trading activities of the top management reveals that very early on, the company was aware of its inability to deliver, if not right from the outset.



    A better supplier may well have delivered Sapphire screens to spec and on schedule, who knows?



    What?! That's crazy talk. Haven't you seen GTAT's sparkling website? This is how they describe themselves:

     

    Quote:


     

    GT Advanced Technologies is a leading diversified technology company producing advanced materials and innovative crystal growth equipment for the global electronics, solar and LED industries. Our technical innovations accelerate the use of advanced materials, enabling a new generation of products across this diversified set of global markets. Our technologies allow our customers to lower the cost of manufacturing providing them with a high return on investment.



    Our expanding foundation of products reflects our long-term commitment to R&D investment and is helping build new industries that accelerate the adoption of energy-saving technologies for a greener world. 

    Today, leading manufacturers around the world rely on the proven performance and reliability of our products, the unmatched support provided by our global service professionals and our role as a strategic partner. 



     

    And, listen to how they describe their sapphire manufacturing experience:

     

    Quote:


     

    GT Advanced Technologies is a leading provider of sapphire production solutions and materials for a growing number of market applications including LEDs, specialty optics and other industrial products. 

    GT's market leading ASF®, offers a sapphire growth system designed to meet various customer and application needs.  Learn More

    GT offers automated sapphire inspection tools designed to improve yields, lower cost and provide repeatable and traceable material inspection that improve yields and lower overall manufacturing costs. Learn more.  

    GT also produces high quality sapphire material used in a wide variety of markets that demand the highest levels of purity and optical performance. For over 40 years, our crystal growth engineers have been advancing the science of growing high quality sapphire, which has enabled the expanded use of sapphire in applications such as medical device, aerospace and defense, and other high technology industries. Learn more.



     

    Yeah!

    They're advanced.

    They're innovative.

    They're proven.

    They're leaders in high-purity sapphire.

     

    Which begs the question: if they're leaders in sapphire manufacturing, why are they exiting that business altogether?

  • Reply 82 of 91
    palegolaspalegolas Posts: 1,273member
    solipsismx wrote: »
    Huh? So you're saying Apple illegally used their power to coerce them into signing a contract?


    [VIDEO]

    He he. Not necessarily illegally. But with great powers comes great responsibility.
  • Reply 83 of 91
    fracfrac Posts: 480member
    tmay wrote: »
    frac wrote: »
    The comment about production machinery is odd. Sapphire is/was GTAT's expertise and even if Apple did buy the machinery under the terms of the loan, if I was the one operating them I'd be very sure before the purchase that they were up to the job...no? And if I were Apple, with no real skill in large scale sapphire production, I would ask the experts - not necessarily GTAT, but certainly another supplier outside of the proposed contract.

    There's definitely something odd about this, I just can't put my finger on it.
    It's interesting that in one section (I'd have to re-read to point it out), Apple was guilty of purchasing the equipment without GTAT involvement; in another, GTAT purchased furnaces from GT who paid third party vendors for parts, more or less, as it seems that the COO isn't really sure what occurred.

    I chastised SOG for his rants early on, but reading this, I'm mostly convinced that this document is lipstick on a pig, the pig being the truth of what actually happened. I also found it humorous, that GTAT was complaining about power losses that added up to $10 m in actual boule losses. No wonder Apple didn't feel it necessary to deal with it; is was a rounding error against the $900 actual production costs. Surely Apple would have done something down the line to correct that, but it wasn't THE issue with production shortages; it was barely a factor.

    Good for them that Apple isn't going to contest it.

    Well actually, the power outages could be a significant factor - or even the predominant factor in the story.
    Last year, my supplier of VIM-VAR steels( extreme high performance materials used in the aviation, aerospace and...around here...the F1 racing industries) was unable to supply due to power outages that rendered his Vacuum electric arc furnaces almost unusable. They lost months of production and profits have yet to recover since they had to recall weeks of sales for resmelting and had to rebuild their equipment several times.
    According to court documents, the lead up time for full production was around 6 months, assuming no production problems. If the quality was compromised by erratic power supplies, then I can well imagine them swallowing months of production and getting nowhere near satisfying Apple's QA contract threshold.
    One thing for sure...these problems didn't just happen overnight.
    Everything is now conjecture, I doubt we will get many other details that explain the failure.
  • Reply 84 of 91
    v900v900 Posts: 101member

    I think that an important factor, if you want to understand this whole mess, is GTAT's background... What did they do prior to the sapphire deal with Apple? Well, not a whole lot in the that particular market. Saphire production was a relatively late addition to GTAT business, and the mainly expanded into sapphire because their original line of business: Solar technology, had collapsed.

     

    GTAT had their IPO in 2008, and if you recall the solar power industry was booming.  (Until 2011 they were known as GT Solar International).

     

    The first few years everything is going swimmingly. The solar business is booming, and GTAT is busy refining polysilicone and especially with making the reactors and equipment that is used to turn silicone into solar panels. In 2008 and 2009 they have over 500 million dollar revenues. In 2011 and 2012 the companies revenues are close to a billion dollars.

     

    But in the same time period two important things happen. In 2011 GTAT buys a small sapphire company, and starts to get involved in sapphire production for the LED market. And in 2012, just as the whole solar industry is seeing extraordinary tense competition with Chinese makers of PhotoVoltaic cells and solar panels, the Obama administration ends a series of subsidies for the solar sector.

     

    And like that, most of the solar industry in the US collapses, and GTAT is left trying to figure out what to do, now that most of their market and customers have disappeared. But wait... What about those sapphire ingots, that are a small part of their revenues? Perhaps they are are worth something, or could turn into another growth nirvana? And along comes Tim Cook and Apple, whistling a merry tune, looking for a good deal on some sapphire.

     

    GTAT jumped at the chance, since their only other choice in 2013 was either bankruptcy or cutting the size of their operations drastically.

    (That means no multi million dollar bonuses or private jets. No CEO wants that for his company..) 

     

    The problem with that, however was that GTAT wasn't necessarily neither especially skill full or terribly experienced with sapphire production. It was only a small and recent addition to their business. And of course the fact that GTAT had little experience running a business outside of a market experiencing massive growth fuelled by government subsidies and organic wheatgrass smoothies.

     

    I think GTATs history and background does a lot to explain the whole mess. And why GTATs management has been so busy with blaming Apple for their bankruptcy. Otherwise people may start asking uncomfortable questions about their own incompetence.

  • Reply 85 of 91
    v900v900 Posts: 101member

    Gotta say, that I can't wait for the next interview with one of principals from GTAT.

     

    Im sure it'll be a riveting tale he'll tell to explain why they're exiting the sapphire business, or why they didn't go ahead with a lawsuit against Apple. 

     

    Something about Tim Cook visiting him at the plant, with two massive, italian looking goons in bad suits saying: "I came to offer some advice. I think it would be best for all parties, if you and your guys dump da sapphire business. But now that I'm here, I'm really impressed with your outfits facilities! I gotta say, that sure is a nice lil' place you got here... Would be a shame if something happened with it. Like a massive fire or sum such event, eh Tony?"

    "Sure would boss!"

    "Or if the orphanage I know you fellas are donating money and volunteers to, would burn down overnight in a similar fashion. Those poor, little children suffocating..."

    "That's be's a real tragedy boss!" 

    "Yes, real tragedy... Anyways, my business advice. Exit da sapphire business, eh? I gotta go launch me some iPhones, but you think about it, eh? Yousa smart fella, I know you'll make the smart choice!"

  • Reply 86 of 91
    haggarhaggar Posts: 1,568member
    Quote:

    Originally Posted by davidness View Post



    This might serve as an example of why so much manufacturing is sourced from overseas counties. I wonder how much harder an non-US company would have worked to meet expectations and obligations. Issues of honor, shame, and responsibility.



    Careful before you start another argument over overseas sweatshop conditions, fair wages, etc.  Of course, one could always say that those overseas employees voluntarily signed on to work in the factories.  The factory owners didn't kidnap the workers as babies, so nothing wrong.

  • Reply 87 of 91
    The bigger question is: is there a viable market for Sapphire in the long-term?
  • Reply 88 of 91
    haggarhaggar Posts: 1,568member

    Quote:

    Originally Posted by vinnie-bob View Post



    Only an idiot would sign a contract where your company assumes all the risk%u2026 therein lies the problem.


     


    Quote:



    Originally Posted by 9secondko View Post



    Apple is one of the last "good guy" companies out there.

     

    Quote:




    Originally Posted by TYancy View Post



    I don't get the "crooks" comments about Apple.



     

    The "crooks" comments are basically something along the lines of "it's only a crime if you get caught" or "being an asshole is not illegal".  While Apple probably committed no crime in this case, it does cause some to question their business practices.  Would a "good guy" even consider asking for such one-sided terms in the first place?  Is it normal business practice, even for "good guys", to lowball the negotiation and ask for ridiculous terms just to see if the other side would be foolish enough to agree?

  • Reply 89 of 91
    Quote:

    Originally Posted by Suddenly Newton View Post

     



    What?! That's crazy talk. Haven't you seen GTAT's sparkling website? This is how they describe themselves:

     

     

    And, listen to how they describe their sapphire manufacturing experience:

     

     

    Yeah!

    They're advanced.

    They're innovative.

    They're proven.

    They're leaders in high-purity sapphire.

     

    Which begs the question: if they're leaders in sapphire manufacturing, why are they exiting that business altogether?




    LoL, I rest my case, dude...

  • Reply 90 of 91

    Quote:
    Originally Posted by davidness View Post



    This might serve as an example of why so much manufacturing is sourced from overseas counties. I wonder how much harder an non-US company would have worked to meet expectations and obligations. Issues of honor, shame, and responsibility.



    Originally Posted by Haggar View Post

     



    Careful before you start another argument over overseas sweatshop conditions, fair wages, etc.  Of course, one could always say that those overseas employees voluntarily signed on to work in the factories.  The factory owners didn't kidnap the workers as babies, so nothing wrong.


     

    Yes, the Tiger-Economy-Sweatshop argument is more than over-balanced by the dodgy, asset-stripping, self-interest-motivated, philistine First-World-Economy CEO's that sell out hundreds of their local workers jobs at the drop of a hat for personal gain, and in the process give the manufacturing reputation of their home countries a very bad name among the successful movers and shakers in the global industry.

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