Apple’s sapphire drama with GT is partialy unveiled

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One of the busted rumors at the iPhone event in September was that the new models smartphones will have sapphire glasses for the screen. But the things are starting to become interesting when GT Advanced Technology filled the papers for bankruptcy earlier this week. This shocked investors and experts because this was the main Apple’s partner for production of synthetic  sapphire.

The absence of sapphire glass for the new iPhones hinted that something is going wrong with GT. According to Wall Street Journal Apple added some financial pressure to the producer as did not pay the final 139 mln. dollar loan. The reason – GT did not cover some technical milestones. The producer was expecting to get this money from Apple to the end of October.

In November 2013 Apple and GT announced a partnership for building a big plant for production of synthetic sapphire. The company from Cupertino buy and lease big Arizona facility to GT and provide a 578 mln. dollar loand. Apple paid the first three tranches totaling 439 mln. dollars, but cut the last one. Even though GT didn’t meet the technical requirements set by Apple.

This partnership was the main source of the speculations that Apple will introduce sapphire protected screens for its iPhones. But the company didn’t announce such feature for its new iPhone 6 models. This news sank GT’s shares with almost 35%.  The rumor was busted for now and less then a month after that GT starts to seek protection from creditors and filled for bankruptcy.

One of the explanation of the GT’s strange move is that with the loan agreement with Apple. There is a clause which allows the tech giant to demand repayment if the producer’s cash fells bellow 125 mln. dollars. In the end of September GT has 85 mln. in cash reserves. In the fillings the sapphire producer wrote that the reason of the bankruptcy is “series of transactions with a key client”, without mentioning Apple.

So which was the first – the egg or the chicken? Or in this case – the absence of the sapphire screens or the problem with GT? It’s very plausible if GT’s factory was not ready for the production and Apple launch its iPhone without the hardened screen. In this scenario Apple is very angry of the situation. The second possibility is that Apple decide to use traditional glass instead of sapphire and stop the payments because they are not needing the exotic material in big volumes at the moment. And which means that busting the rumor is actually busted GT.  The first speculation is more plausible anyway. It is expected that till the end of the year the problem will be solved and we will understand what was the case.

If Apple get its money back that it means it is the first possibility, but if the company from Cupertino refinance GT and boost production we may see more sapphire components in the i-products.

Image Credit: John Karakatsanis

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