Apple to face legal action from Sapphire screen maker GT Advanced Technologies

Apple could be facing legal action from GT Advanced Technologies, who was expected to produce sapphire crystal screens in the iPhone 6, due to "oppressive" and "burdensome" contracts which ultimately lead to it filing for bankruptcy earlier this week.

The display supplier revealed in a court filing that it will close plants in Arizona and Massachusetts which will cause the loss of 890 jobs out of a total workforce of 1,100, and says Apple is to blame.

Apple provided $578m in funding for the Arizona plant, which GT agreed to repay the money over five years.

"GT believes that it has many claims against Apple arising out of its business relationship with Apple," the company said in a filing with the US Bankruptcy Court in Manchester, New Hampshire.

GT is trying to convince the court to break its contracts with Apple, which it claims imposed "oppressive and burdensome terms and obligations on GT", as they were an "unnecessary drain" on its resources, reportedly costing $1m a day at the operations.

Strangely, at the first public hearing since Monday's filing, lawyers for GT Advanced argued it could not reveal why it sought bankruptcy and asked a court to keep crucial documents sealed, a highly unusual move that may keep investors in the dark for now about its financial implosion.

GT Advanced Technologies filed for bankruptcy after shares plummeted 90 percent on Tuesday.

The US firm is now worth just $175m (£109m), down from $1.5bn last week, though at the time GT insisted that the news didn't mean it is going out of business.

"GT has a strong and fundamentally sound underlying business," said CEO Tom Gutierrez. "[The] filing does not mean we are going out of business; rather, it provides us 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."

GT said on Tuesday that it had $85m in cash and was hoping to be granted 'debtor-in-possession' financing status. The company is now seeking debtor-in-possession financing which, once obtained, would provide an immediate source of additional funds.

Last November, GT signed a deal with Apple to manufacture sapphire materials for the firm's upcoming devices, leading to speculation that Cupertino would take advantage of GT's glass in its iPhone 6 models.

However, GT announced in August that an Arizona factory it was building with Apple would not be up and running until 2015, which would be way too late to produce glass for Apple's phones. This is probably why its shares have plummeted in such a short space of time.

Leading up to the iPhone 6 launch there were many rumours suggesting that Apple would use sapphire for the smartphone's screen, but instead the firm went for glass reinforced using an ion process.

Sapphire is the second strongest material on the planet, it's naturally strong, extremely scratch resistant, and can withstand flexing. But one problem with sapphire is that, while it won't scratch so easily, it can still crack when dropped as it has a more crystalline structure than glass, making it brittle.

Light is also an issue, as Sapphire glass doesn't transmit light as effectively as standard glass, which could be a drain on battery life because a device would have to pump out more of it.

Either the above reasons, or that GT messed up its screen manufacture timings, might be why Apple abandoned the idea in favour of glass, and subsequently why GT had to file for bankruptcy.

Additional Info

  • Origin: GhAgent