GT Advanced Technologies, the company that Apple struck a $578 million deal with last year for ultra-hard sapphire material, filed for Chapter 11 bankruptcy today in a federal court.
The move came less than a month after Apple revealed that it wasn’t using sapphire to cover the displays of its newest iPhones.
GT’s chief executive stressed that his company is not shutting its doors. “GT has a strong and fundamentally sound underlying business,” said Tom Gutierrez, CEO and president, in a statement. “[This] filing does not mean we are going out of business; rather, it provides us with the opportunity to continue to execute our business plan on a stronger footing, maintain operations of our diversified business, and improve our balance sheet.”
According to the documents GT filed with the US Bankruptcy Court of the District of New Hampshire, the firm had approximately $85 million in cash on hand at the end of September, down from $331 million as of 28 June and far under the August projection of $400 million in cash it expected to have at the end of this year.
As of 28 June, the company had assets of about $1.5 billion and liabilities of around $1.3 billion.
Long-term deal
GT’s Apple connection drove the news of its bankruptcy: The company operates an Apple-owned Arizona facility where it intends to produce large quantities of sapphire, which Apple plans to use in some lines of its Apple Watch, the wearable slated to debut in 2015.
In November 2013, GT announced a $578 million, five-year deal to provide sapphire to Apple, with the money to go toward the purchase and installation of the equipment necessary to produce the material. GT is to reimburse Apple over a five-year stretch, beginning in 2015.
At the time, the news of the deal triggered a wave of speculation that Apple would use the sapphire as touch display covers for its iPhone, particularly the anticipated larger-screen model, which had been rumoured for months. While that didn’t come to pass – according to tear-down experts, both the iPhone 6 and 6 Plus used Corning’s Gorilla Glass 3 instead – the mid- and top-tier Apple Watch lines are to use sapphire as their face-covering crystals.
In August, GT said Apple had already paid $439 million of the $578 million, and expected that the final payment of $139 million would be made on time by Apple at the end of this month.
But the company had also hinted that things were not going smoothly.
In August, Gutierrez characterised the ramp-up of production at the Arizona factory as “one really massive undertaking”. And GT postponed what it had cryptically called “a business update” conference call from the week of 29 September to this week.
In August, GT also said that it would not provide Apple with sapphire material until 2015.
The Apple deal was an exclusive, and limited GT’s ability to sell sapphire for certain applications to other customers. GT has said that sapphire production was to account for about 80% of its revenue.
Computerworld
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