GT Advanced Technologies (GTAT), the materials company that was once tapped to produce scratch-resistant sapphire glass for Apple's iPhone 6 and iPhone 6 Plus, has filed new papers in bankruptcy court describing the circumstances of its business's collapse – and it places the blame squarely at Apple's doorstep.
In a jaw-dropping declaration filed with the court on Friday, GTAT chief operating officer Daniel Squiller described Apple's dealings with the firm as "a classic bait-and-switch strategy," where what looked like a "game-changer" partnership with one of the world's largest companies turned into a boondoggle that would eventually bankrupt GTAT.
What's more, Squiller said, the terms dictated by Apple gave GTAT no opportunity to correct the course of its business, even as disaster loomed.
"Apple advised that (a) GTAT's management should 'not waste their time' trying to negotiate as would normally occur in commercial transactions because Apple does not negotiate with its suppliers and (b) GTAT had to agree to all of Apple's material terms and the draft agreements prepared by Apple's attorneys, or the deal was off," Squiller said.
Those agreements, Squiller said, were almost entirely one-sided. By the time Cupertino's lawyers were done, he said, GTAT was presented with an deal that, among other terms, required it to:
- commit to producing millions of units of sapphire, even though Apple was under no obligation to buy any of it;
- agree not to conduct any sapphire business with any Apple competitor or any "direct and indirect supplier to an Apple competitor" for years to come;
- create shell companies through which it would route expenditures so that Apple would be shielded from liability in the event GTAT were to go bankrupt;
- pay Apple $640,000 per boule of sapphire that it sold to another company against Apple's wishes;
- pay Apple $650,000 per month for any furnace that was used to produce sapphire for any company other than Apple;
- pay Apple $320,000 for any boule of sapphire that it shipped later than Apple's deadline;
- pay Apple $50m per occurrence should, GTAT reveal the terms of its agreements with Cupertino to anyone.
When GTAT balked at these and other "onerous" clauses, Squiller said, Apple told the company's execs that all of its suppliers must agree to similar terms and that GTAT should "put on your big boy pants and accept the agreement."
And while GTAT thought about backing out and looking for a different partner, Squiller said that "the extensive and all-consuming nature of negotiations with Apple would have allowed little time to pursue alternatives."
Partnered to death
Squiller's declaration goes on to explain that once GTAT reluctantly agreed to Apple's terms, the iThings-maker effectively took total control of the sapphire-producing operation, micromanaging every aspect to such a degree that GTAT couldn't conduct its business profitably.
Although GTAT initially believed Apple wanted to purchase sapphire-producing furnaces from it, by the time the dust cleared in its negotiations, GTAT had agreed to accept "prepayments" from Apple in the form of loans that GTAT would have to repay using either cash or sapphire material as currency.
The terms of these loans meant that Cupertino would be able to purchases sapphire glass from GTAT at below market rate, Squiller said.
Furthermore, GTAT was expressly forbidden from changing "any equipment, specifications, manufacturing process or materials" without Apple's OK, the company's filing states. Meanwhile, Apple's requirements for sapphire output were in constant flux, even where the equipment it required GTAT to purchase was incapable of meeting its own demands.
"By failing to compensate GTAT for losses associated with the development of the technology due to Apple's constant interference over which GTAT had little or no control, including losses caused by Apple's changes in product specifications," Squiller said, "GTAT was forced into the role of a 'captive' supplier to Apple, bearing all of the risk and all of the cost, including the costs of more than 1,300 temporary and permanent personnel, utilities, insurance, repairs, and raw materials."
GTAT is now in the process of liquidating those assets as its bankruptcy proceeds. It has already laid off most of the workers at its Mesa, Arizona sapphire plant, leaving only a skeleton crew to help wind down the facility. It further plans to sell off all 2,036 of the plant's sapphire furnaces to recoup costs.
An October court filing suggested that GTAT would continue to work with Apple to develop sapphire glass production technologies, but given the amount of acrimony on display in Squiller's declaration, that now seems unlikely.
Apple did not immediately respond to The Register's request for comment on the matter. ®