Apple withheld a final $139 million payment that it was due to make to GT Advanced, reports The Wall Street Journal, which may have contributed to the company's decision to file for Chapter 11 bankruptcy. GT also reportedly burned through cash, spending $248 million in one quarter.
That may have led to the company's filing, since its cash, at $85 million, was below a $125 million trigger point that would allow Apple to demand repayment of about $440 million in loans it had advanced. Apple had agreed to lend GT a total of $578 million to help get a large sapphire factory in Arizona up and running. The tech giant reportedly withheld the last $139 million payment it was due to make, although it isn't clear why.
What is obvious is that GT effectively bet the house on a new technology with a new business model and made itself dependent on a single customer--Apple.
Though it is not known why Apple withheld the final $139 million payment, Apple's $578 million loan to GT Advanced was subjected to certain capacity requirements that the sapphire company may not have been able to meet. According to GT Advanced's own filings, it may have had issues with poor sapphire yield rates.
Apple and GT Advanced first struck a deal in late 2013, and along with a $578 million loan for purchasing equipment, Apple also constructed a 700-employee manufacturing facility in Mesa, Arizona, which is run by GT Advanced.
While Apple was widely expected to include sapphire display covers from GT Advanced on some iPhone 6 models, that did not end up happening. Despite purchasing a facility for GT and lending it money to buy equipment, Apple was under no obligation to purchase GT's sapphire. GT was, however, subjected to "exclusivity provisions" that limited what it could sell to other companies.
Though GT Advanced has filed for Chapter 11 bankruptcy, GT Advanced's CEO promised the company would continue operations as it went though a transitional phase to reorganize its business.
GT Advanced will have its first Chapter 11 bankruptcy court hearing on Thursday, October 9 in New Hampshire, where it is expected to explain what caused its bankruptcy filing.
(Image: GT sapphire furnace)
Top Rated Comments
Its called humor #
Duh, using miners is 20th century tech. Apple is using a massive herd of repurposed truffle pigs to sniff out the sapphires... :eek:
That's just make believe, like elves and Gremlins and Eskimos :)
I know, and it must be a bugger to find stones big enough to make phone screens with.
How is it poisonous? This is business: you promise results and fail, your partners don't pay you. They should have had a contingency plan.