Apple offered up more details on what led to the downfall of GT Advanced Technologies in a letter to the failed company's creditors. That letter said GTAT failed to manage its employees and sapphire glass production process, and that the company simply couldn't make a usable product.
Apple says GTAT mismanagement led to bankruptcy
According to a letter to GTAT's creditors from Apple, the company didn't have experience making synthetic sapphire, and it's promise of 578 pound boules wasn't something it could deliver.
GTAT signed a deal with Apple about year ago to produce synthetic sapphire glass for the Apple Watch, iPhone 6 and iPhone 6 Plus. As part of the deal, Apple agreed to front US$578 million in a series of payments so GTAT could build bigger sapphire furnaces and ramp up its production.
When it was clear GTAT couldn't make sapphire boules as big as it promised without significant flaws, it cut back on size. Even at the smaller size, GTAT still wasn't able to produce as much usable sapphire as Apple needed.
The company's failure to meet its commitment led to spiraling expenses, missed deadlines, and ultimately bankruptcy. The letter, which Apple shared with the Wall Street Journal, said the bankruptcy announcement was a big surprise and that it had a meeting set for the day after the filing to work out how to address the sapphire production issues.
From GTAT's perspective, it had been put in a position where all the risk for the sapphire production was on its shoulders. Apple, however, said it was working with the company to find a way to turn its sapphire production into a successful process.
That success, however, would've been difficult to achieve even if GTAT hadn't thrown in the towel and filed for bankruptcy protection. The company apparently failed to supervise and manage its employees effectively, and in many cases paid overtime for workers who didn't have anything to do.
GTAT went on a hiring spree after signing its deal with Apple, bringing on 700 employees. Many of those didn't know who they reported to, and without an attendance policy, there wasn't any consistency in who was at work and when they were there.
One former employee said, "We just kept sweeping the floors over and over. I just saw money flying out the door."
GTAT's furnaces will be sold off to repay the money Apple fronted to get production up and running, and the company won't pay rent through the end of the year on the Apple-owned for the factory it was using.
The story GTAT tells about the failed deal paints a very different story. The company called Apple oppressive and overbearing, and said the terms over the deal were unmanageable. GTAT executives felt pressured to agree to Apple's terms, they said, and that the iPhone maker made unreasonable demands while applying inconsistent standards for the sapphire that was produced.
From GTAT's perspective, Apple drove their business into the ground. A company spokesperson said Apple's account grossly misrepresents what really happened.
In the end, GTAT waited until 20 minutes after it filed for chapter 11 bankruptcy protection to tell Apple about its plan. Executives feared Apple would try to stop the filing, which accounts for Apple's statement saying it was surprised.
GTAT says Apple was a bully partner making unreasonable demands. Apple says GTAT's own incompetence led to its downfall. Regardless of which company is painting the more realistic image of what happened, the end result is still the same: Over 700 GTAT employees are out of work, and Apple didn't get the sapphire it needed for the iPhone 6 and iPhone 6 Plus display.