Apple Drives Sapphire Crystal Supplier Into Bankruptcy With 'Oppressive' Business Terms

Earlier this week, Apple's partner for sapphire display technology, GT Advanced Technologies, filed for bankruptcy claiming that it could not continue operating in its present state. Today, some of the documents originally filed were unsealed and we got a closer look -- including GT Advanced Technologies plan to shutter the plant in Arizona it was supposedly about to bring online.

In early August, CEO Tom Gutierrez told investors that the company was on track to hit technical milestones and necessary targets to bring sapphire to the mass market and receive a further $139M payment from apple. Today, filings revealed that the company failed to meet the terms of its agreement, never received that payment, and is seeking to divest itself of its responsibility to operate the plant. Apple essentially underwrote the Arizona facility and reportedly owns it, so it's not clear what the employer relationship is between plant staff, Apple, and GTAT.

The Sapphire Slide

GT Advanced Technologies trouble began when the iPhone 6 was unveiled as using "ion-strengthened glass" rather than the expected sapphire. While Apple had never announced plans to use sapphire on its upcoming phones, the expectation that it would had driven prices of GTAT up -- and proof it wouldn't sent prices falling again.

Whether that was fair or not, GTAT's actions since have only raised eyebrows. It's since emerged that the company CEO sold more than $100,000 worth of stock just before the iPhone announcement in a move that may or may not have been legal. Now, GTAT is arguing that it needs to be released from its contract with Apple, lay off the 890 people that were contracted to operate its sapphire facilities, and exit that business altogether.

Without condoning GTAT's behavior, it's worth noting that cautionary tales like this are precisely why even companies with as much cash as Apple are loathe to leap for new, unproven technologies. For all its potential advantages over glass, sapphire is fundamentally difficult to work with and the technologies required to successfully bring it to the mass market at scale are still in their infancy. Tim Cook is considered to be a master of supply chain management, meaning it's likely this deal was vetted at the highest levels of the company -- but the technology GTAT was depending on to make their own factory production scale just hasn't worked.

Since Apple apparently actually owns the facilities it's not clear what will happen next. In theory, the Cupertino company might take the plants over wholesale, or GTAT's agreement with Apple may call for the transfer of certain IP in the event the company is unable to deliver on its promises. Filing bankruptcy might or might not void such agreements -- we'll have to see what happens. Apple claims it was surprised by this move, which would seem to indicate a less-than perfect flow of information between two partners who should've been working hand in glove.