Did Apple bully GT Advanced Technologies?

“Last Friday, the judge in GT Advanced Technologies’ (OTCPK:GTATQ) bankruptcy proceeding unsealed a document filed with the court by GTAT COO Daniel Squiller. Both Apple and GTAT had requested the document be stricken from the record as part of their proposed settlement, but the judge chose to ignore both parties. Squiller’s statement is perhaps the most negative depiction of Apple’s business practices that has ever been written,” Mark Hibben writes for Seeking Alpha. “”

“Many of the “onerous” provisions Squiller complains about in the October 8 document are probably fairly typical for an Apple supplier: secrecy provisions with very steep financial penalties for violations and exclusivity agreements that required GTAT to only use its sapphire furnaces to grow material for Apple. In the above areas, I can’t see why Apple would settle for less,” Hibben writes. “But Squiller goes beyond complaints about tough but reasonable contract terms to describe Apple as engaging in “bait-and-switch” negotiating tactics in which it simply “dictated” terms to GTAT. Squiller says GTAT had no choice but to become Apple’s “captive” supplier, in which Apple behaved not as a customer but as a lender, which in fact it was, to the tune of $439 million.”

“Even though I don’t buy most of the dissembling of Squiller, there are some nagging questions about both Apple’s and GTAT’s conduct in this matter.,” Hibben writes. “While I doubt Apple deliberately bullied GTAT, Apple management may have had unrealistic expectations, conditioned by their experience with electronic component suppliers. According to Squiller, Mesa was supposed to be running at full capacity by June under the terms of their Apple supplier agreement. For an electronics supplier, 8 months lead time might be enough, but for what GTAT was trying to do, it was totally unrealistic. GTAT wasn’t just building a new electronic component for Apple, it was building a new factory to make an optical component on a scale never before attempted, using untested, unproven equipment and processes. What were the Apple execs thinking?”

Read more in the full article here.

MacDailyNews Take: Did GT Advanced pull on their big boy pants and sign the deal with Apple? Yes, they did. Therefore, they now live and die by the deal they signed.

Related articles:
GT Advanced COO claims Apple used ‘bait and switch’ tactic – November 7, 2014
Court unseals GT Advanced documents: Apple says it ‘bent over backwards’ to help sapphire supplier – November 7, 2014

25 Comments

  1. The arrogance of companies on the Fortune 500 is well known as are their ‘new’ requirements & deep political connections.

    It is like, “What? Do you mean you want to lose the contract for 70% of your production just because you don’t want to give us a 10% discount this year?”

    1. How about the arrogance of GTAT’s CEO to sell millions of dollars worth of stock all while knowing they couldn’t keep their end of the deal—then complain about how unfair Apple is.

      1. Yes, I lost money owning some GTAT stock. Here is the core of the problem. Apple may not have known that “it was totally unrealistic”. This is GTAT’s world of expertise and they should have known better or they signed hoping that it was NOT “totally unrealistic” and that they could work it out in the contracted amount of time. GTAT and Apple screwed up. Apple should have understood more about the problem so they did not get sucked in by the Little Leaguer trying to play in the big Professional League.

      2. GTAT’s CEO will likely pay heavily for selling on inside info, but I don’t want to call him arrogant. I doubt he will get a CEO job again soon.

        Both company’s execs had faults in attempting to bring a brand new Sapphire cover to market that had never been done before in such high volume in such a short time.

        There was arrogance on both sides of the deal.

        1. I look at it this way.
          GTAT and their CEO has the expertise in making sapphire. Apple was counting on that, right? Apple is not an expert in sapphire production so GTAT, “the experts” in sapphire production knew well and good what was capable and what was not.

          GTAT should have put in the contract proper timelines for each step and if Apple didn’t understand, then walk away from the contract.

          I’ve dealt with some contract negotiations in the past. Each time the contract comes back you get out your red pen and cross out what you don’t agree with. Then back it up with examples or FACTS.

          I believe someone at GTAT saw piles of gold in the future and let that alter reality with regards to timelines.

  2. If Apple’s expectations and conditions were so unrealistic, why did GTA decide to sign the contract in the first place ?

    Why didn’t GTA tell Apple that what they were wanting to do simply wasn’t likely to happen within the expected timescale ?

    GTA took a big chance, If the gamble had paid off, they would have done very well out of it, but as it didn’t pay off, the company has gone bust.

    During it’s history, Apple has taken some massive gambles, but fortunately they did pay off. If those gambles had gone wrong, Apple might not still be trading these days.

    Apple can tackle immense challenges and is prepared to take big risks. Not all companies are able to operate like that and GTA certainly weren’t.

  3. Personally, I could care less. The corporate world of millionaires and billionaires is another planet. What happens on that planet isn’t of my concern or ability to change. I don’t think Apple is fun to deal with at all, but those clowns signed a contract and I expect they had lawyers looking over the contracts as well. If they fudged up, too bad. If Apple “bullied them”, then they shoulda gone elsewhere. I could care less what any of these companies do or say in their negotiations or lawsuits. All of those guys at the top are business bullies.

  4. GTAT ran into problems through a lack of communications. By there own admission, when the factory had problems they didn’t stand up and say to Apple that the problems were going force a renegotiation of the terms. There were several stumbling blocks that they now blame on Apple, but not until the end when it was impossible to fulfill their commitment did they communicate the problems, or their complaints, to Apple. They kept hoping that they could pull it off, even though they knew they could not. GTAT should have balked early on and renegotiated the terms of the deal. They wanted the potential rewards so much it clouded their judgement. They are bitter, but the root of their current situation is based on their inaction.

  5. Remember that Steve Jobs did the exact same thing with Gorilla Glass–asked for a completely off-the-charts production deal.
    Corning came through, GTAT did not.

    “In the 1960s, Corning Glass had developed a very durable type of glass they called “gorilla glass”, because it was so tough. They had stopped making it, but in 2005 the CEO of Corning (Wendell Weeks) explained the material to Jobs, who immediately wanted to use gorilla glass for the first iPhone.
    “[Jobs] said he wanted as much gorilla glass as Corning could make within six months.’We don’t have the capacity,’ Weeks replied. ‘None of our plants make the glass now.’
    ‘Don’t be afraid,’ Jobs replied. This stunned Weeks, who was good-humored and confident but not used to Jobs’ reality distortion field. He tried to explain that a false sense of confidence would not overcome engineering challenges, but that was a premise that Jobs had repeatedly shown he didn’t accept. He stared at Weeks unblinking. ‘Yes, you can do it,’ he said. ‘Get your mind around it. You can do it.”
    As Weeks retold this story, he shook his head in astonishment. ‘We did it in under six months,’ he said. ‘We produced a glass that had never been made.’ Corning’s facility in Harrisburg, Kentucky, which had been making LCD displays, was converted almost overnight to make gorilla glass full-time. ‘We put our best scientists and engineers on it, and we just made it work.’ In his airy office, Weeks has just one framed memento on display. It’s a message Jobs sent the day the iPhone came out: ‘We couldn’t have done it without you.'”

  6. how about this scenario
    maybe it was a scam all along
    maybe they signed knowing full well they couldn’t deliver and only wanted to hype the stock.
    now that the SEC is poling around, maybe they might be looking for someone to blame
    no facts, i’m just sayin’

    1. You mean where GTATs execs get rich and everyone else gets left holding the bag? And you’re taking the increased wealth of GTATs execs as proof? Silly boy. The Captains of American Industry would never do such a thing. How could you even think that?

  7. The title of this article is just wrong! You see, when a contract is drawn and signed by both (or all) parties, it is done in all seriousness and intent of purpose – just like in a blood compact! Hence any mention of the ‘bully’ as alluded to in this article perpetrated by Apple towards GTAT is simply ridiculous!

  8. Really… Must be soooo nice to be sure of yourselves all the time. Anyone being arm chair analysts here ever done anything never done before. Takes a special type of crazy because you KNOW the odds are against you. So gtat tried and failed. At least they tried for something gutsy. Can’t say the same for you lot piling on them.

    1. You’re right; none of us know everything that transpired, but we do know that the top guys at GTAT unloaded their stock right before they went bust. That doesn’t look too good or speak to their ethics or intelligence. They left the employees out on the street, but made sure they didn’t get burned. Hopefully the SEC will be paying them a call.

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