Roughly a year after inking a $578 million deal with Apple, GT Advanced has filed for bankruptcy (via 9to5Mac). In an interesting turn of events, GT Advanced released a statement today saying that it has voluntarily filed under Chapter 11 alongside certain direct and indirect subsidiaries. Filing for Chapter 11 means that the company can continue to conduct business while it solves issues with its creditors.
As of September 29, Apple’s partner had about $85 million in cash. According to GT Advanced’s Q1 2014 financial reports, Apple has already made three of four payments for the sapphire, $440 million of the agreed $578 million.
“GT has a strong and fundamentally sound underlying business,” said Tom Gutierrez, president and chief executive officer of GT. “Today’s filing does not mean we are going out of business; rather, it provides us with the opportunity to continue to execute our business plan on a stronger footing, maintain operations of our diversified business, and improve our balance sheet.
“We are convinced that the rehabilitative process of chapter 11 is the best way to reorganize, protect our company and provide a path to our future success. We remain committed to our roots in innovation and our diversification strategy. We plan to continue to operate as a technology leader across our core set of businesses.”
It is hard to estimate how GT Advanced’s bankruptcy filing will affect the iPhone, as Apple uses sapphire crystal for the camera cover and Touch ID sensor for the iPhone. The same goes for the unreleased Apple Watch: the Watch and the Edition models use sapphire crystal provided by GT Advanced.
You may recall that users were expecting the iPhone 6 to feature a sapphire crystal display. But Apple decided to use the already tested and proven material Gorilla Glass, which strongly affected GT Advanced’s shares.
With GT Advanced bankrupt, it remains to be seen what Apple’s next move will be.
Update: According to Visual Capitalist president Jeff Desjardins GT Advanced’s bankruptcy filing won’t affect Apple in the long run:
The reality is that the scaling up of sapphire glass production to meet Apple’s needs has made things difficult for GTAT, even with the $578 million cash infusion it received as pre-payment. While this announcement remains a surprise, it does not affect Apple much in the long run. In the worst case scenario, if necessary, Apple has the ability to take over GTAT’s factories and intellectual property to integrate it into the company’s supply chain.