Glass Supplier Accuses Apple of ‘Bait-and-Switch’

After initially offering to buy equipment for the iPhone 6 supplier, Apple negotiated a deal that shifted all economic risk to the now-bankrupt com...
Matthew HellerNovember 12, 2014
Glass Supplier Accuses Apple of ‘Bait-and-Switch’

The chief operating officer of GT Advanced Technologies has accused Apple of luring the sapphire glass manufacturer into a “massively one-sided” contract that resulted in it having to file for Chapter 11 bankruptcy protection.

The Oct. 6 bankruptcy filing followed Apple’s decision not to use GTAT’s material in the screen of the iPhone 6. The parties announced a deal Oct. 23 to wind down their relationship, but in a bankruptcy court declaration released last week, GTAT’s Daniel W. Squiller gave his side of the breakup story.

While operating under its October 2013 agreement to supply Apple with sapphire glass for use in certain applications, the COO said, GTAT “incurred losses — resulting in the current liquidity crisis — due to Apple’s inordinate control over GTAT’s liquidity, operations … and decision making.”

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In the first half of 2014, GTAT operated at a loss of more than $127 million, on revenues of only $80 million, according to SEC filings.

Squiller said in the declaration that Apple used a “classic bait-and-switch strategy,” initially offering to buy 2,600 sapphire growing furnaces from GTAT, but then, after months of negotiations, demanding a “fundamentally different” deal in which GTAT would borrow up to $578 million from Apple for the furnaces and get repaid over the next four years.

The new, “massively one-sided” structure, Squiller said, “shifted all economic risk to GTAT because Apple would act as a lender and would have no obligation to purchase any sapphire furnaces, nor did it have any obligation to purchase any sapphire material produced by GTAT.”

At the same time, the exclusivity provision of the contract constrained GTAT from dealing with any other consumer electronics company, according to the declaration. The Apple deal has so far cost GTAT about $900 million, the company says.

For its part, Apple filed a court document Friday in which it said Squiller’s statements were untrue and denied any deception of GTAT.

“GTAT could have walked away from negotiations with Apple and refused to enter into the agreements,” Apple said. “GTAT did not do so because it saw the opportunity to become a supplier for Apple as transformative for its business.”

Featured image: Flickr user textlad, CC BY 2.0

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