GT Advanced bankruptcy offers warning to Apple suppliers

Wed Oct 8, 2014 6:41pm EDT
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By Noel Randewich and Reiji Murai

SAN FRANCISCO/TOKYO (Reuters) - The financial implosion of Apple Inc (AAPL.O: Quote) supplier GT Advanced Technologies Inc GTAT.O this week offers a dramatic illustration of how the iPhone maker can put the screws to suppliers willing to take a short-term risk for future riches.

GT Advanced has offered little explanation as to what prompted its surprise bankruptcy filing on Monday. The company declined to comment for this story.

Analysts and industry insiders cited terms of GT Advanced's deal with Apple that involved building an Arizona factory to make scratch-resistant sapphire glass exclusively for Apple, but which the Cupertino-based company was under no obligation to buy.

Apple said on Wednesday it was surprised by GT's bankruptcy filing and is considering its next steps.

"We are focused on preserving jobs in Arizona following GT's surprising decision and we will continue to work with state and local officials as we consider our next steps,” Apple spokesman Chris Gaither said in an email.

Companies vying to supply components for hundreds of millions of iPhones and iPads have often struck seemingly lopsided deals with Apple. Being tapped by Apple can multiply a supplier's revenues and help it win other customers.

But the risks can eclipse the rewards.

Looking to potentially switch from Corning's (GLW.N: Quote) Gorilla glass to sapphire covers on its iPhones, Apple spoke with several manufacturers who balked at the terms it was offering, according to a person familiar with the matter, who declined to be named.   Continued...

Apple CEO Tim Cook speaks during an Apple event announcing the iPhone 6 and the Apple Watch at the Flint Center in Cupertino, California, in this September 9, 2014 file photo. REUTERS/Stephen Lam/Files