Apple surprised by glass supplier’s bankruptcy

PHOENIX — The bankruptcy of a major supplier of a super-hard sapphire glass that Apple Inc. uses in iPhones has thrown the future of a highly touted Mesa factory in doubt and caught the tech giant by surprise after it spent hundreds of millions of dollars on the plant.

Cupertino, California-based Apple said in a statement that it is working with state and local officials as it considers the future of the 1.3 million-square-foot factory.

Apple partnered with Merrimack, New Hampshire-based GT Advanced Technologies to install synthetic sapphire furnaces and operate the plant, which was new but vacant after solar-panel maker First Solar decided not to use it to make panels.

Apple has advanced GT $429 million to outfit the plant out of $578 million it agreed to pre-pay when it struck the deal with the company last November. That money must be repaid.

GT filed for Chapter 11 bankruptcy reorganization protection Monday, saying it had only $85 million in cash remaining and was seeking new financing to pay for ongoing operations. The company didn’t say what would happen to the new Arizona plant, which it said in August was ramping up to volume production. At full production the companies expected 700 workers to run the plant.

A GT spokesman declined to comment on the plant Wednesday.

Arizona Gov. Jan Brewer had hailed Apple’s decision to open the plant in Mesa, calling it a sign that the Arizona’s efforts to provide a pro-business climate were paying off. The state has cut business taxes and created a raft of incentives designed to lure new manufacturing businesses in the past several years.

But tech businesses, especially one the size of Apple, can also be quick to walk away from facilities, even ones that involve major investments.

Apple has other suppliers for sapphire glass, but the decision to open the new plant brought speculation that it may be used in future screens for iPhones and iPads. Right now, Apple only uses sapphire glass for camera lenses and its fingerprint-reading home button on many new iPhones, and has announced its use on two of three planned models of the iWatch.

The notoriously secretive company hasn’t explained how it might use huge quantities of the new sapphire glass. And when the iPhone 6 was released last month, some were surprised it didn’t use sapphire glass for its main screen.

Brewer’s spokesman, Andrew Wilder, said she’s confident in Apple’s commitment to the plant. Mesa officials also expressed confidence in Apple’s long-term commitment.

“We have heard from Apple. Our conversations remain positive and optimistic,” Wilder said. “There’s no indication that the news that came from GT will have an adverse impact on Apple manufacturing operations in Mesa.”

Apple’s statement said the company was proud of the jobs it was helping to create in Arizona through its domestic-manufacturing initiative, an effort by the company to bring some overseas manufacturing back to the U.S.

“We are focused on preserving jobs in Arizona following GT’s surprising decision and we will continue to work with state and local officials as we consider our next steps,” the Apple statement said.

GT said in a Securities and Exchange Commission filing in August that it was having problems getting high-volume production of scratch-resistant sapphire glass up to speed. It said it had to write off the value of glass that couldn’t be sold because of construction-related interruptions.

Arizona state Sen. Bob Worsley, R-Mesa, said he spoke with Apple representatives on another matter Tuesday and brought up the plant’s future. He said he left the meeting convinced they were committed to the plant.

Worsley helped push a bill through the Legislature this year giving Apple a $5 million tax credit if installs at least $300 million in renewable power capacity at the plant, on top of a $10 million incentive package from the state’s economic development authority.

“There’s still a need for the product, it’s not like they’re discontinuing sapphire glass, and they seemed to be quite surprised with what happened with GT,” Worsley said. “I think the product they make there has a future … and Apple owns all the assets. I don’t think it’s a big deal. I hope I’m right.”

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Information from: The Arizona Republic.

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