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Apple's confidentiality agreement details (the agreement requires suppliers not to confess these details) have appeared in GT Advanced Technologies' documents submitted to the court. These details include that if there is any leak in the product information, Apple will impose a fine of $50 million on the leaked party.
The court will hold a trial tomorrow. GT's lawyers argued before the trial that for the benefit of creditors and shareholders, more details about the relationship between GT and Apple should be made public.
GT said in a document submitted to the court last week that its supplier agreement with Apple was "oppressive and demanding." The incident marked a sudden 180-degree change in the attitude of the Nasdaq-listed company. A year ago, the company was excited to tell shareholders how much the company's partnership with Apple would make a difference. GT now owes more than $500 million to creditors and bondholders.
It's unclear what happened before GT filed for bankruptcy protection under Chapter 11 of the US Bankruptcy Law, and other companies in the Apple supply chain are nervously concerned about the case.
Apple's suppliers are mostly in Asia, but under the leadership of CEO Tim Cook, Apple has worked hard to expand its supply chain in the United States. Since December last year, the company's $3,000 MacPro has been manufactured in Texas.
Last November, Apple said it would lend GT $558 million to help the latter build a sapphire manufacturing plant in Arizona. Although both parties are reluctant to comment on the use of this artificial sapphire, analysts have concluded that it is likely to be used to replace the tempered glass used in iPhone screens. Apple later said that AppleWatch will also use the sapphire screen.
Inspired by tax breaks, both companies have hailed that this partnership will create hundreds of jobs.
Under the agreement with GT, Apple will design and build a factory near Phoenix and lease it to GT, whose power will come from the solar array built for the plant.
But just a year later, GT filed for bankruptcy. This incident has had an impact on both Wall Street and Apple itself. Wall Street threw more than 90% of GT stocks in one day.
Apple said: "After GT made this amazing decision, our focus is on securing jobs in Arizona. We will continue to work with the state and local officials to think about follow-up."
Although GT intends to blame its financial distress on its agreement with Apple, it has been subject to class action by angry shareholders. These shareholders claim that GT “distorts and/or conceals†its own financial situation, its ability to meet Apple's requirements, and the progress in making sapphire.
GT did not respond to requests for comment.
Just in August of this year, GT also said in the earnings conference call that it believes that it can achieve its business objectives and receive a final advance payment of $139 million - this amount should be paid before the end of this month. But Apple did not mention the sapphire screen when it released the iPhone 6 last month, and the GT stock price subsequently plummeted.
Few suppliers can achieve profit margins above Apple's own. Apple's earnings report shows that the company's gross margin for the quarter ended June this year was 39.4%. Apple's long-term partners have become accustomed to their harsh financial terms, in part because they can benefit from Apple's rapid growth.
Among Apple's thousands of suppliers, GT seems to be the first company to encounter this kind of public financial distress. GT has begun to phase out the sapphire manufacturing business related to Apple products. It said that the damage caused by this move amounted to 1 million US dollars per day, and 890 of the 1,110 full-time employees were laid off.
GT hopes that uncovering the mystery of Apple's hard cover on the agreement between the two sides will benefit his case. GT requested the court to “approve its details in the document without reservation, for the benefit of GT creditors, equity holders and other stakeholders, and to ensure the openness, transparency and fairness of the procedureâ€.
In a filing with the court, GT stated that Apple’s confidentiality agreement “specified that GTAT would have to pay Apple $50 million in liquidated damages for every breach of confidentiality obligations.â€
This case may create a precedent for the legal profession because judges must weigh the confidentiality rights of companies with the rights of creditors of bankrupt companies.
GT said Apple's confidentiality agreement gave the iPhone maker "excessive power."
GT requested to disclose some of the documents it submitted. It said: "GTAT also believes that the US Congress's clear desire to be transparent to the public in bankruptcy ... is more important than the confidentiality requirements of the contract. However, if the court does not give clear instructions GTAT will not risk taking on hundreds of millions of dollars in additional debt. The judge approved the GT request, which laid the groundwork for more information this week.
Foreign media: GTAT and Apple's confidentiality agreement details will be exposed
Foreign media said last week that Apple filed for bankruptcy in a key component manufacturer in Arizona, causing a confidentiality agreement between Apple and its suppliers to be dragged into the public eye.