Apple, GT Advanced and the ‘boule graveyard’

“A recent report by The Wall Street Journal makes clear that GT Advanced Technologies’ Mesa plant was incapable of economically producing sapphire for Apple,” Mark Hibben writes for Seeking Alpha. “The report also makes clear exactly what went wrong: GTAT had committed to an experimental production approach that was a failure from the beginning. ”

“According to the WSJ, even as the ink was drying in October 2013 on the GTAT supplier deal, the first boule to be produced using the new furnace design was unusable. Subsequent production at Mesa suffered from a 50% failure rate. An image from the article shows boules with large cracks, opaque inclusions and large color variations, characteristics that would have caused them to be rejected,” Hibben reports. “The defective sapphire boules accumulated in a ‘boule graveyard’ at the Mesa plant.”

“There’s no question Apple structured the GTAT deal to protect itself as much as possible from the risk posed by the new furnaces and that many of those protective provisions have now been deemed ‘onerous and oppressive’ by GTAT. However, I doubt GTAT would have regarded them as such if the furnaces worked as desired.,” Hibben reports. “I believe there’s still an important market for a sapphire-equipped iPhone that Apple could address. How Apple and GTAT navigate through the bankruptcy will largely determine whether such a device comes to pass.”

Read more in the full article here.

Related articles:
Lack of experience, mismanagement doomed GT Advanced’s sapphire adventure – November 19, 2014
GT Advanced Tech creditors chafe at settlement deal with Apple – November 19, 2014
Apple sticking with Arizona plan after sapphire supplier GT Advanced falters – November 18, 2014
Did Apple bully GT Advanced Technologies? – November 11, 2014
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
GT Advanced blames ‘oppressive and burdensome’ Apple terms in quest to ax sapphire production – October 10, 2014

27 Comments

  1. Had GTAT taken Apple’s money and worked through the process to create a consistent, usable product, they may very well have created a gold mine.

    As I see it, they didn’t care if the product was a failure. I believe they kept building furnaces and spending the money as quickly as possible. Telling everyone things were great and getting rich off stock options. Knowing all along they were going to burn through the money and then file.

    Unlike Corning they didn’t care about producing a usable product. It was about getting rich period.

  2. 1] GTA was a furnace maker, not a sapphire maker
    2] Cook asked GTA to make sapphire, in a furnace that had not been tested, using enough of these new furnaces to cover a football field
    3] Cook did not have an appropriate risk mitigation plan in effect, except for secrecy
    4] SHTF and shareholders lost $750 million
    5] Cook should lose his job

    1. This was a scam by GTAT management from the beginning. Apple has a culture of accomplishing what other people think is impossible. Apple investors didn’t lose any money. What’s your problem?

      1. If Apple spent $750 Million of retained shareholder earnings, and got nothing, they lost the money.

        Cook self advertises as a supply chain guru. Never should have happened on his watch.

        On the other hand, if they can sell the furnaces on eBay, or use them to cryogenically preserve the oocytes of their female staff, or maybe drop those useless boules on the field during an Auburn half-time, perhaps something can be salvaged.

        1. Twelve year AAPL shareholder and Tim Cook is doing exactly what I expect of him. I’m thankful we’re only a few years into his 10 year deal.

          BTW name the person better suited than Mr Cook. As much as O respect Elon Musk, atom would still be my preference..

        2. $750M amounts to about 10¢ per outstanding share. Considering that Tim has made me about $60 per share so far this year I really couldn’t give a fsck less about GTAT. Sorry you were a sucker and bought it.

    2. ????

      In layman’s terms this is what happened:
      Apple : “can you make the stuff”
      GTAT : “Absolutely? but we need money up front”
      Apple: “Ok, if you’re sure.We can LEND you the money… ”
      GTAT f-ups, lies about ability… Apple bails them out over and over again…

      then GTAT management cashes out stock.
      declares bankruptcy. Apple does not insist on keeping to contracts (about money recovery) but relaxes terms and then instils plan to try to keep workers employed…

      fire Tim Cook?

      if Apple lost some money it lent because it now doesn’t insist on full recovery but puts workers first, good for Apple
      As an apple shareholder I don’t fault Apple for that and as a shareholder I am more than pleased by the AMAZING RUN OF APPLE SHARES THIS YEAR under Cook (ask ANY shareholder who had aapl at the start of the year till now whether they want to fire Cook. they would laugh in your face )

      (could Apple have supervised GTAT more? perhaps but doubtful as GTAT in court is ALREADY accusing apple for ‘interfering’. So if Apple supervised them more, GTAT would have more ammunition to blame apple for interference Apple had to trust them to do what they promised and Apple secured their own (and shareholders) money by LOANING not giving their money and having conditions to only buy up-to -standard glass , the failure isn’t apples fault but apple is now trying to save jobs )

      1. If there is a recently overcrowded cemetery of sapphire boules out there, that makes me sad. If there was a recently overcrowded cemetery of crooked CEO’s not so much!!!
        One can dream right?

      1. Yes, banishment would be nice. Like the ancient Greek city-states that retained the right to banish one (or a few) outstandingly bad citizens from the state as needed. When people know they can be banished from the land, it helps keep democracy strong and civil.

  3. It seems to me that blame is pretty simple: who approached whom about the deal? Did Apple go to GTAT and say “hey, we’ve got an idea for you to try and if it works, you’ll be wealthy” or did GTAT approach Apple and say “we have this great idea for a product”? It seems pretty clear that whoever’s idea it was to develop sapphire using this style of furnace is the source of the failure.

    1. Um, no. Here’s how this works, since you obviously have no clue about business.

      I come to you and say I want widget X with Y specifications and I will pay you $Z.

      You agree, we sign a contract. Provided that you produce widget X with Y specifications, I owe you $Z. If you fail on either X or Y, then I do not owe you $Z and it is your responsibility to come through. GTAT failed on both X and Y, they are the ones responsible for both.

      Now had they come through and Apple said, nope, we are not paying you $Z, then you’d be right to blame Apple, but no one is saying that happened.

      1. And … Apple already had a backup plan in case GTAT failed.

        It is called Gorilla Glass, where Apple had the orders in place in case GTAT failed to deliver.

        You can fault Apple for being to aggressive in a timeline with an untested oven process and that is & was likely recognized at the start by Apple. You can fault GTAT even more for believing they could solve all problems on a fixed deadline deal.

        Both parties are at fault here.

      2. Thank you for explaining simple contract law; I couldn’t have learned that from “The People’s Court.”

        The complication is did Apple dictate the method by which widget X had to be produced to achieve specifications Y, and was that method unachievable? Based upon what I am reading, I don’t believe that is the case, but that is why I stated it depends on developed the idea.

        1. “did Apple dictate the method by which widget X had to be produced to achieve specifications Y, and was that method unachievable?”

          huh?

          if GTAT didn’t like Apple’s terms (whatever they were) did GTAT HAVE to sign the contract?

          couldn’t they have said “Sorry Apple we can’t abide by these terms” or “we can’t make sapphire like how you specify” etc so “no deal” at the start ?

          1. I agree with that, and I cannot really see any way that it is Apple’s fault. I simply believe at looking at all the facts before deciding.

            If Apple changed the terms, GTAT would not have had enough money to legally challenge them. While it appears GTAT was a swindle from the start, it is also true that small companies cannot legally challenge large corporations: the big bankroll simply overwhelms the small one. Right or wrong isn’t too important when you’re broke.

    2. GTAT had been peddling Sapphire glass and comparing their product to Cornings for years. Anywhere from TV manufacturers to solar panel companies. They had working samples and you could see them at every trade show.

      Obviously at some point GTAT met with Apple folks and who approached who doesn’t matter. GTAT obviously received a huge amount of money based on “signed” contract by GTAT management. GTAT management at some point knew their failure rate was terrible but they continued to build furnaces on a flawed process but kept publicly repeating everything was great. Why?

      Obviously to get rich. Are you suggesting one day the product and process was magically going to change and be less sucky? Riiiggghhhttt.

  4. Would the information about the precise location of the graveyard be encrypted?

    And another thing: Is there a boule scream of death?

    Inquiring minds would like to know.

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