GT Advanced Technologies, a sapphire supplier used by Apple for the Apple Watch and other devices, will close a number of its plants and could file a lawsuit against Apple for "oppressive" and "burdensome" contracts that led to its bankruptcy.
The company filed bankruptcy this week and is closing its plants in Arizona and Massachusetts. The news comes less than a year after the company agreed to supply sapphire glass to Apple.
"The cash burn at GTAT's sapphire manufacturing operations for the benefit of Apple is not sustainable," said the company in its court papers. "The relief requested in the wind-down motion is necessitated by GTAT's liquidity crisis and the substantial daily cash burn of in excess of $1 million with respect to such operations."
In November, it was announced that the company would supply sapphire to Apple with a multi-year contract in place. The company lined up $579 million in prepayment loans from Apple to pay for the equipment to make the material. $139 million was expected this month as the final payment.
It was expected that the sapphire glass would be used on the iPhone 6 instead of the Gorilla Glass that it ended up using instead. Once GTAT failed to deliver the material for the displays, Apple withheld that $139 million, causing the company to go bankrupt.
The company has not currently released details about why it could not produce the materials, saying that if it did it would face $50 million in damages from breaking confidentiality agreements.
"While we continue to explore all options with regards to our Mesa and Salem facilities, we recognize and regret the impact that the actions outlined in our bankruptcy court filings of this morning may have on valued GT employees," said Jeff Nestel-Patt, a GTAT spokesperson.
GTAT has requested that the bankruptcy court end a total of 13 contracts that it signed with the company, including the confidentiality contract.
Apple has stated that it is committed to preserving jobs in Arizona. The company likely feels compelled to address the issue because of the fact that it worked with state officials rather closely to build a new sapphire manufacturing plant in Arizona.
"We are focused on preserving jobs in Arizona following GT's surprising decision and we will continue to work with state and local officials as we consider our next steps," Apple said.
Apple currently uses the sapphire glass in its Touch ID home buttons and as a protection for the rear camera lens on the iPhone 5c. Two out of three Apple Watches are expected to use the material.
