It is no secret that Apple Inc. (NASDAQ:AAPL) likes to keep its dealings with suppliers highly confidential, but when one of them files for bankruptcy, the iPhone-selling company is bound to come under fire. Last week, GT Advanced Technologies Inc., (NASDAQ:GTAT) a main component maker for Apple situated in Arizona, filed for bankruptcy and has put the blame on Apple Inc. (NASDAQ:AAPL)’s stringent policies for its financial turmoil, which it has stated to be “oppressive and burdensome”.
Whether Apple Inc. (NASDAQ:AAPL) is unrealistic in its demands from suppliers is still unclear, but already a lot of details about its terms have begun to emerge in court, including a fine of $50m for any leak of information pertaining to an Apple product. GT Advanced Technologies Inc., (NASDAQ:GTAT) is persistent that the court should allow it to breach its non-disclosure agreements with Apple Inc. (NASDAQ:AAPL), which, according to GT’s lawyers, would be in the best interest of all the stakeholders of the company.
Apple Inc. (NASDAQ:AAPL) and GT Advanced Technologies Inc., (NASDAQ:GTAT) had signed a contract to work together on new sapphire-glass technology for the iPhone last November. Apple Inc. also provided $578m as incubation fund for the development of a dedicated manufacturing facility in Arizona for the new sapphire technology. It’s unclear what the sapphire technology is for, but according to Apple, the new Apple Watch will boast a sapphire screen.
The new facility in Arizona had created hundreds of jobs in the region, and GT Advanced Technologies Inc., (NASDAQ:GTAT) stock boosted on the stock exchange. The lucrative 5-year long relationship was highly popular, and GTAT sold over 90% of its shares in a single day. Last week’s bankruptcy filing has come as a shock to not only Wall Street analysts, but also to Apple Inc. itself, which has deemed it “surprising”.
GT Advanced Technologies Inc., (NASDAQ:GTAT) shareholders, however, are blaming GTAT for concealment of true financial position, and its ability to work with the stringent demands of Apple Inc. (NASDAQ:AAPL), in order to drive up its share price. In a class-action lawsuit filed by angry shareholders, the Arizona-based company has already come under fire for “misrepresentation”.
This lawsuit stems from GT Advanced Technologies Inc., (NASDAQ:GTAT)’s recent claims in August about satisfactory progress in the development of the sapphire technology. It had claimed to have met Apple’s operational targets on time, and said it was expecting a final payment of $139m by the end of the month. This gave a highly stable outlook of GT’s progress, but come September, when the iPhone 6 was released, there was no sign of a sapphire screen anywhere on it, which GT had promised to deliver.
No defense has been presented by GTAT in this regard so far.
As far as Apple Inc. (NASDAQ:AAPL)’s stringent requirements are concerned, according to Sir Jonathan Ive, who is the Design Chief at Apple Inc., they are absolutely necessary in order to make the product unique and of a higher quality compared to competitor brands in the market. But he also admits manufacturers are not able to translate his vision one hundred percent, saying that “most of our manufactured environment testifies to a degree of carelessness.”
Although most of Apple Inc. (NASDAQ:AAPL)’s suppliers have become accustomed to its difficult demands, GT Advanced Technologies Inc., (NASDAQ:GTAT) is one of the few over the years which have run into financial troubles. GTAT owes over $500m to stakeholders, and throwing the ball in Apple Inc.’s court is the only way out.
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