This post was written by Keith Dawson for UBM Tech’s community Web site All LED Lighting, sponsored by Philips Lumileds. It is archived here for informational purposes only because the All LED Lighting site may go dark at any time. This material is Copyright 2013-2015 by UBM Americas.

2014-10-21

GT Advanced Technologes Is Bankrupt

There goes Apple's sapphire.

GTAT was flying high with its deal to supply sapphire for Apple's iDevices. Then the company crashed, and claimed that a confidentiality agreement compels its silence as to why.

We had hopes that the partnership with Apple would expand the worldwide supply of sapphire and eventually lead to lower prices, with the benefits possiblly spilling over into the general lighting market.

GTAT abruptly filed for Chapter 11 backruptcy protection on October 6, and on October 9 requested that -- against strong precedent -- the court procedings be carried out in secret. GTAT claimed that an unspecified confidentiality agreement threatened to cost the company $50 million per disclosere if certain proprietary arrangements were made public.

The company's stock lost 90% of its value in the days following the filing, and was de-listed from NASDAQ when its price fell below $1.

Eventually it emerged that the company tying GTAT's hands with a confidentiality agreement was Apple. Apple apperently does not want details of the deal GTAT called "oppressive and burdonsome" to be spread into the world.

In a hearing on October 15, US Bankruptcy Judge Henry Boroff told Apple to specify which documents absolutely needed to be kept confidential, according to a Bloomberg report. "I have documents stacked a foot high," the judge told Apple. "It can't be that all of it needs to be under seal." He gave Apple until October 20 to provide "an extremely specific list."

That deadline passed with the secrecy still intact, but by this afternoon CNBC was reporting that Apple and GTAT were "on the cusp of a consensual global settlement" as to what documents would be unsealed.

Creditors are clamboring for an end to the secrecy, according to the New Hampshire Business Review (the company is headquartered there), claiming that GTAT is using its shield as negotiating leverage. GTAT is not saying which of its creditors will be paid first -- information that is ordinarily out in the open in bankruptcy proceedings.

Eight shareholder lawsuits have been filed in the last two weeks, all of them naming GTAT's officers and directors, since the corporation itself is shielded by the bankruptcy filing. Most of the suits cite an optimistic report the CEO made just over a month ago as misleading and deceptive.

Access to sapphire
Apple had planned to invest $578 million so GTAT could manufacture sapphire in an Apple plant in Mesa, Arizona. Apple has advanced $440 million of that total to date. Since GTAT now says that in the "severe liquidity crisis" leading to its backruptcy filing it has only $82 million in cash on hand, Apple may end up eating most of that investment.

But Apple still needs sapphire for iPhone Home buttons and lens covers, to the tune of around 12 million per month. And the Apple Watch needs a sapphire face when it ships early next year. Apple must be scrambling now to shake loose enough product from the global sapphire supply to meet its considerable needs.

And as for dreams that sapphire prices would fall amid a growing worldwide supply... kiss them goodbye.

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