Apple’s sapphire maker GT Advanced Technologies files for bankruptcy

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]