GT Advanced announces settlement with Apple; to exit sapphire production

GT Advanced Technologies Inc. and Apple have reached a settlement agreement under which GT will wind down its sapphire materials production in the company’s Mesa, AZ and Salem, MA locations. The company indicated that it will exit from the market as a producer of sapphire materials and will refocus its business as an equipment supplier, manufacturing and developing sapphire growth systems and processes.

Under the terms of the settlement agreement, which is subject to approval by the Bankruptcy Court, GT will be released from all exclusivity obligations under its various agreements with Apple. GT will retain ownership of all production, ancillary and inventory assets located in Mesa and Apple is provided with a mechanism for recovering its $439 million pre-payment made to GT over a period of up to four years without interest, solely from a portion of the proceeds from ASF® sales. The agreement provides for a mutual release of any and all claims by both parties. As a result of the agreed upon terms, GT retains control of its intellectual property and will be able to sell its sapphire growth and fabrication technology, including ASF and Hyperion™, without restrictions.

GT and Apple will continue their technical exchange involving the development of processes for growing next generation sapphire boules as GT continues to build on its successfully deployed ASF115Kg technology and expand its range above 165Kg.

“We are pleased with the settlement that we have negotiated with Apple,” said Tom Gutierrez, president and chief executive officer, in a statement. “We realize that our filing for Chapter 11 protection has caused uncertainty and hardship for many of our important stakeholders. We have been working diligently to develop a restructuring plan that will allow us to emerge from Chapter 11 as quickly as possible and with the operating flexibility and resources to position GT for long-term success. This agreement with Apple is an important step in that direction as it will allow us to monetize our advanced sapphire growth and fabrication technologies in an unrestricted manner. In addition to continuing to sell our industry leading sapphire equipment, we remain committed to advancing our Merlin™, Hyperion™ and next-generation PV and polysilicon solar solutions.”

As a result of the decision to wind down its sapphire materials operations, earlier this week GT initiated the process of shutting down the Mesa facility and approximately 650 Mesa employees have been laid off. A group of Mesa employees will remain on board to help with the wind down of the facility over the coming months. The company expects that there will be additional reductions-in-force implemented in the coming days, which will impact its Salem, MA, Merrimack, NH and select Asia locations.

“We recognize and regret the impact that these actions have on our valued employees and their families and we are committed to supporting them through this transition,” Gutierrez concluded. A redacted version of the Settlement Agreement is available (.pdf) here.

GT will file its motion seeking bankruptcy court approval of the settlement agreement on Monday October 27, 2014, and the Bankruptcy Court is scheduled to hear such motion on November 25, 2014.

Source: GT Advanced Technologies Inc.

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Apple and GT Advanced settlement: Ending the madness – October 22, 2014
GT Advanced, Apple ink deal for ‘amicable’ split-up – October 21, 2014
GT Advanced Technologies Inc. suspended by Nasdaq – October 17, 2014
GT Advanced confidentiality hearing with Apple delayed – October 16, 2014
GT Advanced bankruptcy judge challenges Apple’s penchant for secrecy – October 15, 2014
Apple, GT Advanced in secret session with bankruptcy judge – October 9, 2014
Apple supplier GT Advanced: Confidentiality pact rules out bankruptcy explanation – October 9, 2014
Apple ‘surprised’ by GT Advanced’s bankruptcy filing – October 8, 2014
Shattered sapphire dreams at GT Advanced – October 8, 2014
Apple’s withholding of $139 million payment led to GT Advanced bankruptcy filing – October 7, 2014
GT Advanced CEO sold 9,000 shares the day before Apple’s iPhone 6/Plus event – October 7, 2014
Law firms launch investigations into possible violations of federal securities laws by GT Advanced – October 7, 2014
Analyst: Apple may take possession of sapphire furnaces from GT Advanced – October 7, 2014
Apple to provide debtor in possession financing to GT Advanced? – October 7, 2014
Investors stunned over GT Advanced bankruptcy filing – October 7, 2014
GT Advanced files for chapter 11 bankruptcy court protection – October 6, 2014
Apple and GT Advanced rampup sapphire production in Mesa – August 11, 2014
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9 Comments

    1. A beginning is always to be found at the end.
      The question to ask is, “Is the beginning a new one? or is it one that we are accustomed to?”.
      The other question to ask is,”Is this really the end?”

  1. GT gets 4 yrs to pay Apple back, Apple gets no interest on the money in that time, AND no sapphire … or means to make it themselves, as production assets are retained by GT (assets that Apple designed & aid for too, if I remember correctly).

    Is that about right? Am I missing something?

    The fish stink is high on this one. It used to be a truism that there are no friends in business, but I guess “or in government” needs to be added to that now too. Apple’s making some enemies. Probably the right kind, but they better keep their guard up better next time.

    1. What are you talking about? This is not about Apple, it’s about GT moving into an area (sapphire production) it was not qualified to operate. GT realized its mistake, and decided it needed to get out.

      From a bankruptcy standpoint, Apple is actually coming out pretty good. It will eventually get its money back (assuming GT continues making a profit and thus making payments), and, more importantly, Apple gets to keep its processes and plans secret.

      Bottom line is Apple got into a bad deal. I’m sure it’s not the first time this has happened, but it may be the most high profile breakup due to the expectations, publicity surrounding the deal, and speed of dissolution.

      1. The thing I keep wondering is who will buy GT’s sapphire growth technology, when it seems pretty obvious that their technology didn’t work to give Apple what they needed. I think GT is in trouble and chapter 11 isn’t going to fix it. They need a new CEO, but he will get richer for “navigating the company through financial hardship”, while hard working families get poorer and laid off. Life isn’t fair (and never will be.) On the plus side, I bet there will be no shortage of companies scrambling for that unfulfilled contract with Apple.

  2. This sounds like the prototype large furnaces didn’t make good enough sapphire. GT owed money on the prototype furnace parts and couldn’t pay.

    Now GT gets to try to make their large sapphire furnace to work correctly. Essentially, Apple is loaning them the money to do this.

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