GT Advanced Technologies Inc (OTCMKTS:GTATQ) said today that it has finalized the settlement agreement with Apple Inc. (NASDAQ:AAPL) in the wake of its bankruptcy filing. The company owes Apple $439 million, which was prepaid in connection with the supplier deal the two companies struck last year for GT to supply sapphire glass for Apple’s iPhones.
GTAT to exit sapphire glass business
Under the terms of the agreement announced today, GT Advanced will wind down its sapphire making operations in its Arizona and Massachusetts locations and then exit the market completely. The company will focus on being an “equipment supplier manufacturing and developing sapphire growth systems and processors.”
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As part of the wind-down process, GT has already closed down its Arizona facility and laid off about 650 employees there. Some will remain with the company to finish winding down the facility in the next several months.
“We have been working diligently to develop a restructuring plan that will allow us to emerge from Chapter 11 as quickly as possible and with the operating flexibility and resources to position GT for long-term success,” said GT President and CEO Tom Gutierrez in a statement. “This agreement with Apple is an important step in that direction as it will allow us to monetize our advanced sapphire growth and fabrication technologies in an unrestricted manner.”
GT to pay back Apple
Apple will release GT from all of the “exclusivity obligations” that were part of the supplier agreements between the two companies. GTAT keeps all of its “production, ancillary and inventory assets” at the Mesa, Ariz. location and will pay back Apple the $439 million prepayment over four years without interest. The repayment will come from a portion of the ASF sales.
GT will also keep control of its intellectual property and can sell its ASF and Hyperion “sapphire growth and fabrication technology” without any restrictions. It will also continue to engage with Apple regarding the development of next generation growing processes for sapphire boules.
The bankruptcy court still must approve the settlement proposal between Apple and GT. GTAT will file the motion seeking approval of the settlement agreement with Apple on Monday. The bankruptcy court is expected to hear the motion on Nov. 25.