Supply Chain Matters provides a follow-up to Apple supplier GT Advanced Technologies and the events leading up to its bankruptcy filing. In early October, in a sudden and startling announcement, this developing supplier for new, more durable sapphire glass applications for Apple’s product lineup announced that it had commenced a voluntary filing under Chapter 11 of the Bankruptcy Code as a best means to reorganize and protect that company.
This weekend, The Wall Street Journal, which first identified GT Advanced Technologies as the prime supplier of the new sapphire based material, revealed details previously included but sealed in the bankruptcy filing in October (paid subscription required). On Friday, the bankruptcy judge had ordered the release of this information.
According to the WSJ, GT’s CEO characterized Apple’s efforts as a “classic bait and switch” strategy that caused this supplier to be stuck in what was described as an “an onerous and massively one-sided deal.” The article further indicates that the supplier described constant changes in product specifications without adequate compensation and that Apple had no obligation to buy the material but demanded the supplier restrict the company from selling to other consumer electronics company. In an earlier motion to the court, Apple stated that the filing was intended to “vilify Apple and portray Apple as a coercive bully” and that the CEO’s statements were untrue and defamatory. Apple also invested the sum of $439 million which it must now try to recover.
This Apple supplier relationship has obviously reached a point of no-return. The WSJ quotes GT’s bankruptcy lawyer as indicating: “There are discussions between Apple and the company not about continuing the marriage but rather what I could call a divorce without a custody fight.”
As Supply Chain Matters has noted in many prior commentaries, the perils of being an Apple supplier are those of 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 has an apparent far different outcome.
Obviously, Apple has no desire to have such a supplier relationship vetted in business and social media but this is a far different era of transparency and openness that sometimes transcends discussions behind closed-doors.
This is today’s mission for high tech and consumer electronics suppliers, namely dealing with whatever is required to make the customer’s business model successful, but sometimes at-peril if a counter-balancing strategies are not pursued. One of the Comments affixed to the WSJ article very pointedly states: “If you cut a deal with Apple, you better know what you’re getting into.” That comment sums it all.
Bob Ferrari
