GT Advanced (teaser 001)

GT Advanced Technologies, an Apple partner that runs the sophisticated manufacturing plant in Mesa, Arizona which churns out sapphire components for iOS devices, filed for Chapter 11 bankruptcy protection on Monday.

Filing for bankruptcy lets GT continue normal operations and meet its obligations until it reorganizes its business and negotiate new financing arrangements with its creditors.

As of September 29, 2014, the company has approximately $85 million of cash. The company owns and operate furnaces and related equipment on the behalf of Apple at the Mesa facility. Earlier this year, the iPhone maker said it will prepay $578 million for the equipment and related retooling. GT agreed to reimburse Apple for those funds over a period of five years beginning in 2015.

In forecasting its 2014 revenue, GT recently said it expected to make $600 million to $800 million, with 80 percent of those sales attributable to its sapphire business.

In a media release Monday, GT said it expects the court will authorize them to continue to “conduct business as usual” while it devotes renewed efforts to resolve its current issues and develops a reorganization plan.

The filing “does not mean we are going out of business,” said Tom Gutierrez, president and chief executive officer of GT, adding the move provides the firm 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”.

Seen below: a 115kg cylindrical section of industrial sapphire called a “boule”.

GT Advanced (boule, Pocketnow 001).jpg

Apple currently uses the expensive gemstone to protect the Touch ID sensor and iSight camera lens on iOS devices and will also use it to protect the Retina screen on the Apple Watch. However, neither the iPhone 6 nor the iPhone 6 Plus utilize sapphire protection, allegedly due to low yields of the material.

The Messa facility is pictured below.

GT Advanced (furnaces, Pocketnow 001)

In February, the Cupertino firm started moving sophisticated equipment and furnaces into the Mesa plant, which is said to produce two times the current worldwide capacity of sapphire.

The eco-friendly, 700-employee facility should create 4,000 new jobs in Arizona, if successful.

Although the Apple deal is strategic to both parties, GT is subject to “certain exclusivity terms” and as a result it said it expected “substantially lower” gross margins.

Maybe Apple should now step in and buy GT outright?

[GT Advanced]

  • WvB22

    So weird. How can this company file for bankruptcy which such a powerful partner behind them. Something tells me this is part of a bigger plan.

  • Andy

    They must be having a *hard* time.

    • Hyr3m

      *Ba Dum Tsss*

  • Ahmed Karoui

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  • Fanboy 

    I guess im a noob, but why is a company allowed to file bankruptcy with $85 MILLION IN CASH in hand? I mean I guess…………

    • Ahmed Karoui

      A company files for bankruptcy when it owns LESS than what it owes. This means that even if it has $85 M in cash on hand, its liabilities still outweigh its assets! It is, therefore, insolvent (not able to pay its debt holders). Hence, it is forced into bankruptcy. This also means that its capital is no longer sufficient to absorb the drop in its assets’ value below its liabilities!

      • Fanboy 

        Thank you! I learned something new today 🙂

      • Ahmed Karoui

        No problem 🙂

      • rockdude094

        Haha

  • John

    Sapphire glass isn’t better than gorilla glass anyways, it breaks easily.

    • Hyr3m

      Sapphire isn’t glass…

    • macfoxpro

      …and you know this how?

    • Hyr3m

      You didn’t have to edit out “glass” in “Sapphire glass”. I was trolling…
      “Sapphire glass” is one of the applications of synthetic sapphire.In this case, “glass” is used as a layman term not referring to the amorphous state but to the transparency and to its usage as a “window”.
      This goes to show the power of social pressure on truth. I troll, people upvote me, it affects what you think about what you wrote to the point of editing it out even though it was perfectly acceptable. 😀

      On another note, sapphire is more scratch-resistant than gorilla glass but it seems to not be as resistant to pressure (at least in corning’s pressure tests). It’s a bit hard to judge which is better at this point… I think what would be interesting to try is dropping the sapphire glass and gorilla glass on their edges because that’s their weak spot and the majority of smartphone screen shattering happens when the side of the phone hits the ground (especially on its corner).

      • Bugs Bunnay

        i’d pick scratch resistance over durability any day since my phones are outfitted with a case

      • Hyr3m

        The types of pressure test corning shows when comparing sapphire to gorilla don’t really represent real life situations so one has to wonder what is the full definition of “durability” in this case… and we’d have to see “real-life” phone drop tests to know which screen is more durable…

  • raulortiz318

    “Mr. Gutierrez and another senior executive sold GT shares on Sept. 8, a day before Apple announced the new phone will use a glass screen. Mr. Gutierrez sold 9,232 shares of previously restricted stock that vested that day, at roughly $17.38 a share; according to a filing, the sale was part of a pre-arranged selling program. Monday, GT shares closed at 80 cents.”

    Nice to know the senior execs got a nice payday before the filing. Meanwhile regular investors got shafted.