Apple Inc. (NASDAQ:AAPL) sources components from hundreds of suppliers around the world. But few of them have gone the way GT Advanced Technologies Inc (OTCMKTS:GTATQ) went. GT Advanced shocked the Wall Street last month by filing for Chapter 11 bankruptcy. Meanwhile, longtime Apple suppliers have generated billions of dollars in revenues from the Cupertino company over the years.
Japanese suppliers are very conservative
Executives from Pegatron Corporation (TPE:4938) and other Apple suppliers told The Wall Street Journal that Apple is a strict but fair partner that offers suppliers a chance to taste success. Existing suppliers said that GT Advanced Technologies, or any other company, should not promise anything that they can’t deliver. Further, suppliers said that the Cupertino partners should diversify their client base.
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Japanese suppliers tend to be extremely conservative when telling the iPhone maker what they can deliver. In contrast, GT Advanced Technologies made lofty promises as it couldn’t afford to lose such a big opportunity. Apple signed a one-billion dollar contract with GT Advanced to manufacture sapphire for the new iPhones. GTAT couldn’t deliver sapphire as promised. Apple said it had received only 10% of was initially promised.
GT Advanced’s own mistakes led it to bankruptcy
GT Advanced had promised Apple that it would build huge 578-pound sapphire boules. But its 578-pound cylinders were flawed and produced material that was unusable. The company hired hundreds of employees at its Mesa, Arizona facility. But those workers had no real work to do. They would spend most of their time sweeping the floors again and again. Apple says GTAT’s “mismanagement” led to its bankruptcy.
Overpromising Apple is a big mistake. GTAT accused Apple of using bait-and-switch strategy. The New Hampshire-based company characterized Apple as burdensome and oppressive. But those who have been working with Cupertino for years don’t consider it a villain. Meanwhile, GT Advanced Technologies creditors have complained that the sapphire got too little in its proposed settlement with Apple.