Apple Reaches Bankruptcy Deal with Sapphire Screen Maker
Tech giant Apple and one of its suppliers have decided to cut their losses in a dispute over the material that was to be used in the screens of the company's smartphones. GT Advanced Technologies Inc. (GTAT) has reached an agreement with Apple that will partially relieve the New Hampshire-based maker of optical, laser and solar applications of the $439 million in debt it still owes Apple after a failed effort to qualify as a supplier of sapphire for use in iPhones and other products.
The settlement calls for an auction to be held by November 23 to sell off the equipment that GTAT bought to use to supply the sapphire glass for Apple's products. The proceeds of the auction will be divided between the two companies, GTAT said in Chapter 11 bankruptcy papers filed on Monday in the U.S. Bankruptcy Court in New Hampshire. GTAT would like to keep some of its equipment, as many as 600 sapphire-making furnaces, according to the filing.
But GTAT will sell what it can and what it can't sell it will give to Apple. Apple will scrap any leftover equipment and extinguish the loan it made to GTAT that was meant to transform the latter company from an equipment maker into a prominent supplier of smartphone screen material. Once GTAT abandons the Arizona facility meant for sapphire production, Apple plans to turn it into a data center.
Still in Dispute
Sapphire is supposed to be more shatter resistant than glass, which would seem to make it the ideal material for phone screens. With that in mind, Apple loaned GTAT the money to develop and manufacture enough material to supply the next generation of iPhones. Some Apple Watch screens also use sapphire, as do the camera lenses on iPhones. But GTAT missed its September 2014 deadline for developing the sapphire glass to be used in the iPhone 6. The phone was released with a glass display and GTAT filed for bankruptcy shortly thereafter.
What happened to kill the deal is still in dispute. GTAT said the problem was a series of changing demands from Apple, while Apple maintained that it was GTAT's inability to meet performance goals. The end result: GTAT was stuck without a customer and a huge debt to Apple, leading to the bankruptcy filing.
Previously GTAT had reached a deal with Apple that would have given it time to sell the sapphire-making furnaces that anchored Apple's loan and use some of the proceeds to pay off its debt. But the more than 2,000 sapphire-making furnaces installed at Apple's Mesa, Ariz., facility have not yet been sold.
GTAT has until December 31 to get the furnaces out of the plant. The company said it is seeking a hearing in the case next week, adding that the best option is to invite bidders to a fast auction of at least 1,400 of the 2,000 sapphire-making furnaces. As of this afternoon, a bankruptcy judge had not signed off on the filing. The bankruptcy filing was first reported by the Wall Street Journal. Neither company has commented publicly on the filing.
Posted: 2015-11-05 @ 6:55am PT
No sapphire isn't supposed to be more shatter resistant, it is more scratch resistant.