Broke Ex-Apple Sapphire Supplier Says Apple Pulled A Bait-and-Switch

Broke Ex-Apple Sapphire Supplier Says Apple Pulled a Bait-and-Switch

When Apple and GT Technologies first struck a deal for GT to produce sapphire for Apple's products, GT announced the deal with excitement. Now that GT has filed for bankruptcy, the company is painting the deal in very a different light. GT COO David Squiller condemned Apple for pulling a "bait and switch" resulting in "an onerous and massively one-sided deal."

That statement is a big departure from what GT's president Tom Gutierrez said in a 2013 statement. "We are very excited about this agreement with Apple," Gutierrez wrote in headier days.

Squiller explained why GT blames Apple for its current financial woes, stating that GT couldn't produce the agreed-upon amount of sapphire in time because the fabrication equipment that Apple had picked out couldn't do the job fast enough. GT did produce some sapphire, of course, but it wasn't enough to satisfy Apple's demands. And since GT and Apple had an exclusivity agreement, GT couldn't sell the sapphire Apple no longer wanted to any other company.

This situation obvious sucks hard for GT, but the problem with blaming Apple is actually pretty clearly laid out in Squiller's statement:

GTAT committed to supply millions of units of sapphire material. Apple, however, has no obligation to buy any of that sapphire material.

Yeah, thats a shitty deal, but it's a deal the company agreed to. Just because the worst-case scenario that could happen within the confines of the deal came to pass doesn't mean Apple hoodwinked GT into signing a deal against its will. Apple didn't write the crappy terms in invisible ink.

GT took a major gamble and it didn't pay off. Apple carried out the terms of the agreement brutally and without compassion, probably because Apple is a profit-driven multinational corporation and not a kind nun.

I've reached out for comment to Apple and GT and will update if they respond, but however this mess turns out, it's a warning to Apple suppliers that just because the iPhone maker pumps into your operation doesn't mean that you're invulnerable.


Comments

    When a large corporation reaches out to a small supplier the supplier often has little choice but to take what's offered after all (so the saying goes) "half a loaf is better than no loaf at all".

    The sad fact is that Apple does what it does because it can.

    Bait and switch? Really?

    Who sold off their shares the day before Apple announced the new iPhone without sapphire screens? GT knew months ahead they could not supply product and made a tidy profit using insider knowledge.

    US authorities are investigating these so called directors actions. Jail is what's needed!

    Feel sorry for all the 700+ employees who probably thought how good it was that Apple was investing in jobs for their country and were kept in the dark. Some Chinese company is no doubt going to buy the furnaces cheaply and start making product cheaper...

    Yeah a shitty deal for the company. Makes you wonder whether they actually had a legal team to review it and which moron was the one to sign off on the deal.

    Sounds like Apple wanted to just kill off possible competition.

      Who is the competition? Apple doesn't make sapphire screens.

        Gt can't make sapphire for Apple's competitors any more.

          They never could. They didn't even make sapphire prior to Apple contracting them too.

            They did though. That's there business. They're a glass manufacturer and they sold sapphire glass before the Apple deal. But Apple enforced they had to use Apple specified equipment not what they had been using all along.

              In the Wall Street journal article GT was never a producer of sapphire prior to Apple paying them to make it. They just made furnaces to make sapphire (as opposed to using said furnaces). Apple gave them money to make more furnaces and then use them to create sapphire.

    That's not a major gamble, that's ethically shonky business dealing and Apple is in the wrong. Painting it any other way is useless apologisim.

      With all due respect @ozoneocean, the same could be said for your response.

      As Gigaom pointed out (https://gigaom.com/2014/11/07/apple-gtat-contracts/):

      "… The unsealed documents are unlikely to be used by either side for leverage. Last month, Apple and GTAT reached a new agreement that was described as “an amicable parting of the ways” by a GTAT attorney. In that agreement, GTAT will repay $439 million to Apple over four years interest-free …"

      Sounds like Apple (or rather, their management) behaved less 'shonky' than they had to …

      GTAT could have always said 'No'. They took a shot, and they lost, and they (or at least their management) do not appear to be 'shonky' free.

      So you're saying that, GT has incompetent lawyers for realising the deal for what it was sooner and that is somehow, Apples fault. Small business tries to meet demand of one of the most highly anticipated products from arguably one of the most sought after brands and surprise surprise they failed to meet it. If Foxconn and well oiled slave labour factory can't keep up with demand what makes you think a tiny(comparatively) business can?

      You're being emotional and not logical. You can refute this if you want but unless you're citing specific facts and using exact logic it will fall on deaf ears. That's the market they trade in.

        "You're being emotional and not logical"
        That's always a dodgy line to take, I think it's its own logical fallacy.

        I was approaching this from an ethical standpoint, as I said. I judged based on the facts in this article.

      I can't see what is so "shonky" about the deal... If I loan you half a billion dollars interest free to produce a material that I require, and you know full well that I can not use that material if you don't produce enough of it, how is it my fault if you don't produce? And why can't I say that you can not sell that same material that I paid for to someone else?

    I know of 2 other Apple's vendors/suppliers who have similar contracts. 1 of them at least pulled out because of the hoops Apple requires you to jump through. Apple's control of the supply chain from top to bottom gives them many advantages - that are quite often a benefit to the end customer - but the companies they work with may as well be wholly owned subsidiaries but without the risk to Apple.

    For someone that works in distribution, I can fully understand how GT got squeezed.

    The likes of Coles, Woolworths etc have such buying power they often have no choice but to take a risk. These large manufacture/sellers squeeze you because they know they can and leave you to bankruptcy. It's not ethical hence why the ACCC are battling Coles at the moment.

    I've worked at a company that was in the position GT is in now. large corporation comes in with unrealistic expectations, sells the deal/idea to a company, overzealous director doesn't read the contract, large corp enforces contract to the tee, company goes bust trying to comply with the contract. While Apple may be legally in the right, the question remains if they were morally wrong.

    It is also bad business practice to screw your suppliers into the ground. You need them to continue operating profitably so you don't have to waste time looking else where.

    Apple have a few suppliers that manage to work it out, Samsung is one of them.

    Everyone gunning apple for ethical reason don't understand business or simply just want to apple hate. Whats not ethical is offloading your shares with inside knowledge.

    Apple is a very large company, if they take a soft stance with suppliers they can end up with issues down the line.

    Its the same working with government and tenders, its the same with anyone taking a contract.., I don't see how people can't understand that. Apple risked 500 mil on it, its not a charity, its two companies doing business. One does not deliver on its end of the bargain and the deal ends.

    If this wasn't apple no one would care. But the Apple hate on this site is blind and irrational at times.

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