Apple’s withholding of $139 million payment led to GT Advanced bankruptcy filing

“Apple Inc. last year said it would invest $700 million to build the world’s biggest artificial-sapphire factory. On Monday, the company running that factory — GT Advanced Technologies Inc. – filed for bankruptcy protection,” Daisuke Wakabayashi reports for The Wall Street Journal. “The bankruptcy filing comes less than a month after Apple unveiled new iPhones with glass screens, rather than sapphire. Apple’s decision not to use sapphire followed tests in which the synthetic sapphire proved brittle, cracking when phones were dropped from various heights and angles, according to people familiar with the matter.”

“The final straw for GT appears to be Apple withholding a $139 million payment, according to people familiar with the matter. That was to be the last of four prepayments from Apple to GT totaling $578 million. In August, GT had said that it expected the last payment to arrive by the end of October—contingent on meeting certain operational targets at the plant in Mesa, Arizona,” Wakabayashi reports. “GT shares collapsed 93% Monday following the surprise bankruptcy filing, wiping out roughly $1.4 billion in market value.”

“Two of the three models of Apple’s new smartwatch will be covered by sapphire. A person familiar with Apple’s plans said GT’s bankruptcy won’t affect those plans,” Wakabayashi reports. “Eric Virey, a senior analyst at French research firm Yole Développement, said the size and scope of the Arizona plant suggests Apple had planned to use the sapphire screens for more than the watch. At full capacity, he estimated the plant would produce twice as much sapphire as the current output from nearly 100 manufacturers world-wide. ‘For me, there is absolutely no doubt that it was for the smartphone,’ he said.”

Read more in the full article here.

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