Mismanagement and Inexperience Contributed to GT Advanced's Sapphire Failures

It's widely known by now that Apple and GT Advanced's sapphire partnership fell apart after the latter company was unable to produce enough high-quality sapphire to meet Apple's production needs, but The Wall Street Journal has taken a deeper look into GT Advanced's failures and its defective sapphire boules, which ultimately led the company to file for bankruptcy.

Apple and GT Advanced's sapphire partnership may have been doomed from the start because GT Advanced had no experience with mass producing sapphire before it inked a deal with Apple. Its first attempt at a large 578 pound sapphire boule, created just before the deal was finalized, was reportedly "flawed and unusable."

Images of cracked and damaged boules produced by GT Advanced

GT Advanced COO Daniel Squiller stated in a court affidavit that Apple had basically forced the company into a contract with "oppressive and burdensome" terms that were impossible to fulfill, but the profile from The Wall Street Journal, largely sourced from Apple's court filings, paints a very different picture, putting much of the fault on GT Advanced's mismanagement.

In an effort to ramp up production quickly to meet Apple's needs, GT Advanced hired hundreds of workers "with little oversight" before all of the company's furnaces were fully functional. Bored employees were paid overtime to sweep floors, while others skipped work all together.

GT quickly set out to hire 700 staffers. Hiring moved so quickly that at one point in late spring, more than 100 recent hires didn't know who they reported to, a former manager said. Two other former workers said there was no attendance policy, which led to an unusual number of sick days.

GT managers in the spring authorized unlimited overtime to fill furnaces materials to grow sapphire. But GT hadn't built enough furnaces yet, so many workers had nothing to do, two former employees said.

"We just kept sweeping the floors over and over," one of the former employees said. "I just saw money flying out the door."

The first sapphire boule that GT produced for Apple after the deal was inked came out "cracked so badly" that all of the sapphire was unusable. GT Advanced was spending 30 days and $20,000 on each sapphire boule, and according to people familiar with Apple's operations, "more than half of the boules were unusable." In fact, GT stored broken and damaged boules in an area that employees ended up labeling the "boule graveyard."

GT Advanced attempted to switch to smaller sapphire boules in June, but production still wasn't up to par, with Apple receiving only 10 percent of the originally promised sapphire in the weeks leading up to the launch of the iPhone 6.

It quickly became evident that Apple would not be using sapphire in the iPhone 6, and in September, GT began running into serious money trouble. Facing cash flow issues, the company requested its final $139 loan payment from Apple, which was initially withheld because production milestones were missed. Apple offered $100 million, a delayed repayment schedule, a higher price for some of the sapphire, and a relaxation of the exclusivity agreements between the two companies, and a plan was in place for the two companies to meet on October 7.

GT Advanced ended up filing for bankruptcy on October 6, however, opting to keep the filing quiet because GT executives believed Apple would "try to thwart them." Following the filing, Apple and GT reached an agreement to end their partnership and dissolve their contracts, with GT Advanced shutting down all sapphire production at the Mesa, Arizona plant.