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Behind Apple's Sapphire Screen Debacle
Frankie70 (803801) writes Apple invested more than $1 billion in an effort to make sapphire one of iPhone 6's selling point. But the iPhone 6 was released without the sapphire screen. GT Advanced Technologies, the small company chosen to supply Apple with enormous quantities of cheap sapphire, declared bankruptcy a month later. Recent documents from GT's bankruptcy proceedings, and conversations with people familiar with operations at Apple and GT, provide several clues as to what went wrong. GT said that to save costs, Apple decided not to install backup power supplies, and multiple outages ruined whole batches of sapphire. The terms Apple negotiated committed GT to supplying a huge amount of sapphire, but put Apple under no obligation to buy it. In its bankruptcy documents, GT would later accuse Apple of using "bait-and-switch" tactics, and said the terms of the deal were "onerous and massively one-sided."
In other news: A company so desperate to get into bed with Apple signs away their soul for rainbows and promises.
"Apple ruined us by trying to buy our product"
Maybe suppliers will now reconsider getting involved with Apple. Large companies with extreme market power will often bully their suppliers. It is common for large customers to make demands for price reductions below the contract price, with threats to dump the supplier if they refuse. Having a single customer that makes up most of your sales is a significant risk to any business and something that has to be carefully managed.
Agreed. Plus I believe Apple merely lent money and secured loans for GT -- they didn't invest in them and push them around; they're a public company.
It's aluminum oxide. Basically impossible to accidently scratch. Can be made very Crack resistant if made correctly.
Real life transparent aluminum for your phone. Armored "glass" which is really colorless sapphire/ruby.
In its bankruptcy documents, GT would later accuse Apple of using "bait-and-switch" tactics, and said the terms of the deal were "onerous and massively one-sided." (Emphasis mine...)
And Apple gets blamed for this shortcoming? Why did GT sign on the god damned dotted line?
It's a freaking type of gemstone. It's blue... so when you see the blue gemstones on jewel encrusted whatevers, they'd be the sapphire ones. Have you been living under a rock? Yes, it can be made artificially and is very hard. It is why the best watch crystals are made of sapphire.
-- I ignore anonymous replies to my comments and postings.
Sounds an awful lot like Jack Tramiel's questionable business practices while at Commodore:
1. Make a large order to a supplier for parts
2. Supplier runs up costs and works to complete the order
3. Fail to pay the supplier in a timely manner
4. Let the supplier go bankrupt
5. Buy the supplier at liquidated prices
6. Profit!
READY.
PRINT ""+-0
Crystaline aluminum oxide (AL2O3) to be precise. This material is called ruby if it is red, or sapphire in most other colors (Provided it is of gem quality, otherwise it is just corundum regardless of color)
It is pretty much only diamond that can scratch sapphire.
It's not that cut and dried. Apple was the one who insisted on renegotiating the contract, as well as not installing a backup power supply for each furnace and starting production in a non-commissioned plant.
Apple originally offered to buy sapphire-growing furnaces from GT. But according to sources familiar with negotiations, after five months Apple demanded a major change in terms, requiring GT to supply the sapphire itself. In fact, Apple wanted GT to build the world’s largest factory to produce the stuff—more than doubling the world’s entire sapphire production capacity.
Producing sapphire requires a very clean environment, but ongoing construction at the factory meant that sapphire was grown "in a highly contaminated environment that adversely affected the quality of sapphire material," according to GT. It also requires uninterrupted supplies of water and electricity to regulate the temperature of the molten aluminum oxide used to form the boule. GT said that to save costs, Apple decided not to install backup power supplies, and multiple outages ruined whole batches of sapphire.
Make no mistake about it - Apple was in the driver's seat in this mess. It was their deadline for the iPhone6 that set the stage for attempts to grow sapphire in an unfinished factory. But Apple will find a way to make money out of this.
"Transparent" is a shit show that trades on every stereotype going. A man in drag is NOT a transsexual.
IBM had used Micropolis drives back when 5MB was a common size. They insisted that Micropolis buy new production equipment to make the 40s in enough quantity to supply the projected PC demand, then IBM chose another vendor, leaving Micropolis with a lot of production capacity for which to pay, and no customer. Bye-Bye, Micropolis.
They could still have ended negotiations. That said- it would take an extremely good businessman to do it at that point, most would already be counting the money Apple would make them. But if a deal is wrong you need to walk away. They're hardly the first company to fail because they made a bad decision to take on a contract they weren't ready for.
I still have more fans than freaks. WTF is wrong with you people?
Uhm, you're supposed to notice this before you sign, not after you go bankrupt.
Sheesh, evil *and* a jerk. -- Jade
I newer understood the "not installing a backup power supply for each furnace" situation.
Who owned and was responsible for the factory? The story has always been that GT produced Sapphire, and that apple maybe wanted to buy it.
So why did GT let apple control anything at all, about their factories?
From the article " after five months Apple demanded a major change in terms, requiring GT to supply the sapphire itself. In fact, Apple wanted GT to build the world’s largest factory to produce the stuff"
So If Apple wanted GT to supply the sapphire, why did they have any say in the day to day running of the factories. Sounds like GT gave far to much factory control to Apple for no reason at all.
The salespeople saw money. The business people, who would normally assess risk, got blinded by the prospect of making huge amounts of money. The engineers who could see disaster coming were not consulted or ignored.
Probably the GT execs ran out of money (by greedy bonus payouts to themselves and/or incompetence in planning) and had to go begging to Apple for more money for backup power supplies, at which point Apple said, "no, why didn't you ask for that in the first place?"
Apple would never have given the money to GT if they knew the odds of failure were so high, GT must have done a song and dance to Apple that GT was able to execute. You can see other suppliers to Apple not having such a rough go of it because you may have to promise big but you have to deliver big. I would believe that the terms and investment that Apple has given to the other suppliers are similar in form.
Not op, but I assumed it was a trade name, not that they were using actual sapphire crystals. Now that I know the truth, it's much cooler.
Not much sympathy for either party from me, as I'm sure both companies understood the nature of the contract. I wonder, though, how much it has cost Apple in sales and good will to be putting out a product without the top-of-the-line screen. Probably a lot more than they were trying to squeeze out of this deal with their ruthless negotiating tactics. This is the sort of thing Stephen Covey (7 Habits of Highly Effective People) was going on about when he advocated seeking out the win-win deal. If your partners don't prosper, it will always come back to hurt you.
it would take an extremely good businessman to [terminate] at that point, most would already be counting the money Apple would make them. But if a deal is wrong you need to walk away. They're hardly the first company to fail because they made a bad decision to take on a contract they weren't ready for.
The Register ran an opinion piece when the details on this story were first appearing a couple of weeks back. It noted an almost unbelievable point others have commented on elsewhere in this thread:-
[The usual form of the contract is that companies agree] to build whatever to [the agreed] standard and by that time. Excellent. If we do so then you have to either take them and pay for them or if you don't take them you've still got to pay for them. If we don't make them to standard or in time then here's the damages we'll pay. But if we hit the spot then you're committed to pay for them.
But here's what it actually did sign up to:
Those agreements, said Daniel Squiller, GTAT's chief operating officer, were almost entirely one-sided. By the time Cupertino's lawyers were done, he said, GTAT was presented with an deal that, among other terms, required it to: commit to producing millions of units of sapphire, even though Apple was not obligated to buy any of them.
Something the author describes as "sheer lunacy". Either they were utterly, *utterly* struck blind or there is something strange and dubious going on. Oddly, the "struck blind" explanation isn't as improbable going by a comment in the letters section (from "Edwin"):-
The sexiness of having Apple (or some other A-list brand) as a major customer is extremely seductive to many 'executives'. Not only because it's great advertising, but the bolstering of the supplier's individual executive ego.
"Slashdot - News and Chat Sites Deviant". (Click "homepage" link above for details).
This isn't uncommon in industry (it's also not the normal way of things). If we want to to be certain that a supplier builds something the right way, we might specify every detail of the tooling, and sometimes buy it and install it ourselves.
--Jim (me)
Put it in your pocket with keys.
I've got some carborundum sandpaper ... In all fairness, you did say "pretty much"
Geology - it's not rocket science; it's rock science
They don't seem to care about losing customers. Perhaps they know that their customers are mostly fans who will always buy whatever overpriced gadget they throw at them, as long as the new product carries a new buzzword or two. That's what the sapphire screen was, a buzzword, and that is made clear by the fact that instead of switching to something about as effective like Gorilla glass, they shipped a scratch-able glass screen instead. It was not about using the best material for their screen, it was just about using the most marketable material. When the plan failed, their response was to change the marketing campaign.
In the meantime, at the office, all iphones without protectors are full of scratches, while the Samsungs have mostly pristine screens...
Violence is the last refuge of the incompetent. Polar Scope Align for iOS
GT never produced sapphire prior to this arrangement, they manufactured photo-voltaic silicon. Apple was looking to produce sapphire on a scale needed for their iPhone, something nobody had done before. GT convinced them they could do it. Apple required an exclusivity clause because they didn't want to invest any money unless they got all the sapphire and in return, the production process would be owned by GT. Apple bought the facilities in Arizona and loaned GT money to manage the operations. It was a large gamble that GT was willing to take. Apple's position carried less risk because they have a strong cash position and could continue to use Gorilla glass. When production yields where bad and GT didn't meet its obligations, Apple decided not to buy any sapphire. For its part, Apple did agree to renegotiate the contract to help GT, as they held out hope that GT could perfect the process after the iPhone 6 shipped. Unfortunately, GT's cash position deteriorated to a point where they needed bankruptcy protection.
I once contracted for a medium-small company that was under contract with Disney to supply services. Disney was a royal pain in the ass to this company in that they were super picky, but the company used them for bragging rights when attempting to sign on other companies. Eventually they dropped Disney when it was realized the bragging rights were not worth the abuse.
Table-ized A.I.
Sapphire ***IS*** extremely true scratch resistant (as in the surface atoms resist displacement) because sapphire is BRITTLE.
Well... no. Sapphire is extremely scratch resistant and sapphire is relatively brittle. Just because something is scratch resistant does not mean it has to be brittle. Gorilla glass is, for example, both harder and tougher than normal glass. Diamond is both harder and tougher (iirc) than sapphire.
But it sounds like Apple was bankrolling GT for the factory. which means they negotiated some kind of investment budget. Apple probably went through the list, found what sounds like excesses and asked GT if all this was really necessary or if it could be done cheaper. Apparently GT failed to justify the cost, so it was stricken from the final budget. When shit hit the fan it might have been too late to start redesigning and they were already behind schedule and budget with botched batches, GT might not have had the financial muscle to fix it and Apple might be concerned about throwing good money after bad. After all, this is how most terrible investment decisions are made, we're already $500 million down the hole so we need to spend a hundred more to finish it. Then we're already $600 million down the hole so we need to spend a hundred more to finish it and so on. Apple had a reasonable plan B by sticking with Gorilla Glass so they weren't pot commited as they'd say in poker.
Remember, just because GT can point to this and say that's why it failed doesn't mean it'd be a success otherwise as they might have stumbled on the next hurdle too. After all, if the product that did come out okay was that great I'm sure Apple would have been more willing to see it through too, unless they decided it was cheaper to let GT fail and pick up the pieces. I really doubt it's as easy as Apple buying GT's assets, installing a few UPSes in the factory and they're ready to go for the iPhone 6s. Like they say, production at this scale had never been attempted before which generally means you have to expect the unexpected. GT seems to have bet everything on things going according to plan, they gambled and lost. It's pretty cheap to try blaming Apple for their own botched execution, they're a business and don't just throw money around. If they failed to get sufficient investment that's nobody but GT's fault.
Live today, because you never know what tomorrow brings
Is it feasible to make sapphire smartphone screens which are not too shatter-prone?
Sure it is. Home Depot checkout scanner glass is sapphire-coated. You can drag steel tools across it all day for years on end.
Most if not all carbides will readily scratch sapphire, although in fairness you're not going to encounter many of them unless you work in a machine shop.
Please stand clear of the doors, por favor mantenganse alejado de las puertas
Sapphire is *not* aluminum any more than water is hydrogen. Al2O3 is a compound with a completely different set of physical properties from atomic aluminum.
They always have. The original iPhone was the first smartphone to use Gorilla glass, created by Corning at Apple's prompting. iPhones have continued to use the best available Gorilla glass continually on every single iPhone since. The screen on a Samsung is no more scratch resistant than the iPhone--your anecdotes are either coincidence or just you making shit up. Guess where my money is.
" Is anything LESS scratch resistant than a soft metal like aluminium? Does no-one here have even a basic understanding of material science."
Do you even have a basic understanding of mineralogy, let alone the Moh's scale of hardness, let alone basic chemistry to apply to those two particular topics?
Because you certainly seem to not have it.
Still waiting on Serviscope_minor to wake up to fucking reality and realize that Jessica Price isn't going to fuck him.
Put it in your pocket with keys.
Could not agree more, don't care what it's made from, if you do the above, it will come out scratched.
It's like keys that are unobserved in your pocket turn into diamonds.
There are three kinds of falsehood: the first is a 'fib,' the second is a downright lie, and the third is statistics.
Wedding band or phone? Wedding band or phone? Wedding band or phone? ...fuck it, wedding band has to go!
Eventually they dropped Disney when it was realized the bragging rights were not worth the abuse.
The problem is that- depending upon the contract- the smaller company being screwed over is now in a position where they *can't* pull out of the contract because their large customer has them over a barrel. They've expanded and/or dedicated significant resources to supplying and pleasing that customer they thought would be a cash cow- possibly dropping other markets- and if the large company was to terminate the contract as threatened, they'd then have a massive production operation to fund with no-one to buy the end result.
It's either that quick death, or the slow death of having your margins ruthlessly squeezed beyond a sustainable point.
From another letter in the comments section of that article (from "Mugs"):-
I was once stuck on a train with a colleague ranting about a similar contract. The contract was in the 40s between Woolworth and his grandfather who ran a broom factory. Woolies started off with a small order, gradually increased until they took all the output then drove the price down until the factory went bust.
This was behaviour I was already familiar with relating to Wal-Mart, but it shows you it happened even back then. You can bet your life that in every case, the large customer knew exactly how this was going to play out in advance.
See this:- The Wal-Mart you don't know
And this:- The Man Who Said "No" to Wal-Mart
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