Apple Inc. (AAPL) Sapphire Supplier Files Chapter 11 Bankruptcy

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Apple Inc. (AAPL) Sapphire Supplier Files Chapter 11 Bankruptcy
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Apple Inc. (NASDAQ:AAPL)’s sapphire screen supplier GT advanced (NYSE:GTAT) has filed for Chapter 11 bankruptcy protection. Prior to the launch of the iPhone 6, there were rumors that the screen of the phone would be made of Sapphire, a precious gemstone. Also, the company fanned the rumors when it entered into $578 million deal with Sapphire glass producer GT advanced Technologies.

GT promises a come back

On September 29th it was revealed that GT has just $85 million in the bank, and then the company filed for bankruptcy. GT’s stock has gone down more than 90% to $1. Factories of the company will run in the normal cause, and GT is assuring investors that it will come back.

“Today’s filing does not mean we are going out of business,” Tom Gutierrez, GT’s CEO, said in a statement.” Gutierrez added that it offers the company a chance to implement the business plan on a stronger footing and improve the balance sheet. GT is trying to get debtor-in-possession financing to get more funding for the operation.

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Supplier to Apple: good or bad?

Apple Inc. (NASDAQ:AAPL) lent $578 million to GT advanced for making Sapphire glass in Mesa, Arizona in 2013. With the fund, GT advanced was supposed to pay 700 employees and cover production cost for many Sapphire screens. The company was given a five years time to pay the money back to Apple, starting in 2015. Just last year, Apple bought sprawling 1.4 million square foot Arizona facility from a solar panel producer for $113 million, and gave it on a lease to GT.

Apple makes series of prepayments to its suppliers ensuring speedy production of the component, something that can backfire for the smaller firms, who cannot meet the pressing demands and timings of Apple.

As of now, it is not clear if Apple has to ditch sapphire screen due to the financial condition of GT Advanced. There are possibilities that Apple Watch might not sport a Sapphire screen, when it hits store shelves next year in 2015. The iPhone maker has not released any statement related to GT’s financial situation or the future of sapphire screen for the watch. Also, GT advanced has refrained from commenting on the Chapter 11 filing in regard to its agreement with Apple for the Sapphire screen.

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Aman is MBA (Finance) with an experience on both Marketing and Finance side. He has worked as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, reviewing tech gadgets, playing PC games and cricket. - Email him at amanjain@wordpress-785388-2679526.cloudwaysapps.com
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