Supply Chain Matters has featured previous commentaries concerning GT Advanced Technologies, an advanced technology sapphire glass supplier that experienced some of the perils in being a supplier to Apple, particularly in a new product development phase.
In October of 2014, this advanced technology supplier was unexpectedly forced to file for Chapter 11 bankruptcy protection when Apple suspended its supply contract. The news reportedly wiped out in upwards of $1 billion in equity value when the news broke. A further casualty was a 1.3 million square foot advanced sapphire glass production facility near Mesa Arizona that included more sophisticated glass fabrication furnaces and was supposed to ramp-up to supply sapphire glass requirements for various Apple products including the iPhone.
Since that time, information leaked from bankruptcy court filings pointed to a tense supplier relationship that GT Advanced described as “an onerous and massively one-sided deal. “The supply agreement eventually ended when Apple withheld a product development process payment. GT was forced to lay off in excess of 700 employees at the Arizona production facility, which Apple has since announced will be converted into a world-class global command data center. Apple itself invested the sum of $439 million in the GT Advanced relationship.
On Monday of this week, after exiting Chapter 11 protection, the supplier has now announced that it will be reducing its workforce by an additional 40 percent in order to “right size” its cost structure. According to a published report by The Wall Street Journal, GT Advanced had about 1000 employees when it filed for bankruptcy.
As we observed in prior commentaries, product innovation involves time sensitive collaboration for product design and test changes as well as supply chain production ramp-up needs. That is why product design process information is quickly becoming the new requirement for inclusion within end-to-end supply chain business and collaboration networks.
The perils of being an Apple supplier include a high risk-reward ratio. That includes having the capability of high agility in the wake of what others would view as rather difficult obstacles. That tendency dates back to the era of Steve Jobs who instilled a perfectionist culture for design engineering. Also with Apple come huge scale and the potential for financial reward. In the case of GT Advanced Technologies, the risk-reward strategy continues to have an apparent far different outcome.