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Apple Sapphire Supplier To Close Two Plants, Lay Off Hundreds of Workers

Illustration for article titled Apple Sapphire Supplier To Close Two Plants, Lay Off Hundreds of Workers

Apple better have a backup plan for the sapphire screens on its upcoming Apple Watch. The situation with its sapphire partner GT Technology does not look good. The company filed for bankruptcy earlier this week, and now announced plans to close two of its sapphire plants in Arizona and Massachusetts.

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890 people will lose their jobs. This contradicts GT's stated plans to continue business as usual, and it doesn't look good for GT's partnership with Apple.

Since GT is keeping the exact details of its situation under wraps, we don't know exactly what caused its current financial state and to what extent Apple was involved...but it's clear GT holds Apple at least partially responsible for this mess.

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"GTAT believes that it has many claims against Apple arising out of its business relationship with Apple," the company said in a filing asking for authorization to shut down the plants. "Before the Petition Date, on October 31, 2013, GTAT entered into several agreements with or for the benefit of Apple. The agreements shifted the GTAT Group's sapphire-related business model from being primarily an equipment manufacturer/supplier to also being a sapphire materials manufacturer. As discussed in detail in the Supplemental First Day Declaration, the agreements imposed oppressive and burdensome terms and obligations on GTAT," the filing continues, laying the blame squarely on Apple.

I asked GT's lawyer Daniel Sklar to elaborate on what was "oppressive and burdensome."

"That's the part under seal," he wrote me in an email. Damn it.

I've emailed Apple to ask whether this will change its plans regarding the Apple Watch and will update if I hear back. [Wall Street Journal]

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DISCUSSION

Signs point to apple directly causing the bankruptcy. As of a couple of months ago GT said they expected to have about 400 million in cash by years end (including a final payout from Apple of about 125 million). As long as they werent trying desperately to cover up a horrid situation that mean that 275 million unexpectedly was spent and the 125 never came, obviously. What could cause that so quickly? Apple had a clause in their contract that said they could penalize them 50 million for failed targets in performance or production, each.

So Apple gets cold feet about the contract and the whole sapphire thing in general when it isnt as good as expected, or as cheap, or as plentiful, or all of the above and decides to pillage as much of the company's cash as possible (which was Apples originally to be fair) before everything goes to shit when Apple announces that its pulling out of the contract, and effectively forces GT into bankruptcy and forces them to shut down their plants since those plants were built to supply Apple ? Seems probable since GT never even attempted to raise cash on their own this year.