Apple Parts Ways With Sapphire Supplier GT Advanced

By Todd R. Weiss  |  Posted 2014-10-22 Print this article Print
Apple sapphire screen settlement

Apple and GT Advanced agreed to end their relationship less than three weeks after the sapphire screen producer filed for Chapter 11 bankruptcy protection.

Apple and sapphire screen producer GT Advanced Technologies have reached a settlement to end their apparently strained relationship, less than three weeks after GT Advanced filed for Chapter 11 bankruptcy earlier in October.

The settlement was unveiled Oct. 21 by attorneys for GT Advanced in a hearing in the U.S. Bankruptcy Court in New Hampshire, according to a report by The Wall Street Journal.  

The pact provides an "amicable parting of the ways," GT Advanced attorney Luc Despins, told the court, The Journal reported. "Mr. Despins said GT Advanced and Apple have agreed to file a revised explanation for GT Advanced's surprise bankruptcy filing as part of the pact, and ultimately erase from the public record the court papers that set out what went wrong in the relationship between the two companies."

Back in February, Apple was reportedly ready to fire up a sapphire factory it had financed with then-partner GT Advanced in Mesa, Ariz., so that production could begin for super-strong sapphire screens that were rumored to be included in the iPhone 6 smartphone lines, according to an earlier eWEEK report.

Apple CEO Tim Cook had confirmed in January that Apple was opening such a factory that would focus on sapphire glass, though he wouldn't say what the glass was for at the time. GT Advanced, in a January 2014 corporate overview, told investors, "In Nov. 2013, GT signed a multi-year sapphire materials supply agreement with a leading OEM, which is expected to provide GT with a platform for recurring sapphire materials revenues."

The settlement between Apple and GT Advanced "suggests Apple will be turning to 3rd-party sapphire suppliers to obtain cover glass for the Apple Watch, which is set to ship in early 2015," according to an Oct. 21 report by SeekingAlpha.

Neither Apple nor GT Advanced responded to requests from eWEEK for comments about why the two companies are ending their sapphire partnership.

Rob Enderle, principal analyst for The Enderle Group, told eWEEK that the move to end the relationship between the two companies makes it clear that "Apple is moving on."

The recent reports of bending problems occurring for some owners of iPhone 6 smartphones also made Apple's sapphire plans more questionable, said Enderle. "The idea of using sapphire on larger devices was ill-considered, particularly given Apple's use of a relatively soft material for the iPhone 6 frames," he said. "Even if the sapphire would have remained flawless, unlikely given how phones are carried and used, it would have snapped under the stress put on the phone.  It does work for watches, but here there are plenty of suppliers in the market and Apple wouldn't need a captured vendor."

Enderle said he expects that the ongoing contractual and legal issues with GT Advanced will now likely force Apple to "stay with Gorilla Glass on the phones, iPads and iPods and bid existing vendors against each other to get the best prices for the Apple Watch."

He said he doesn't expect the ending of the relationship between the two companies to cause delays for the Apple Watch, which is expected to hit the market in 2015. "Sapphire is common in watches, so finding manufacturers to bid against each other wouldn't be hard. And they could always drop back on Corning [the makers of Gorilla Glass], which likely could deliver a formulation that met Apple's requirements if they ran into any unlikely issues here."

Maribel Lopez, principal analyst for Lopez Research, agreed:  "If Apple is dropping a supplier, it's obviously lacks confidence in its ability to supply at scale," she told eWEEK. "Given that it's a cautious company, it would obviously have a back-up plan to avoid delays. I'm sure many suppliers are clamoring for Apple business. They have 5 months before the watch needs to ship, so I think they'll be fine."

GT Advanced had announced its Chapter 11 reorganization plans on Oct. 6. The company's sapphire displays were rumored for months to have been included in the new iPhone 6 models that Apple launched in September, but the super-strong display material was instead not featured in the new phones.

GT Advanced, which is based in Merrimack, N.H., filed for Chapter 11 in the United States Bankruptcy Court for the District of New Hampshire so that it could continue to operate and work toward a reorganization plan to rebuild its business, according to a statement by the company.

On Oct. 16, GT Advanced announced that the NASDAQ stock market was suspending trading on its common stock due to its Chapter 11 filing.


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