Court docs reveal Apple told GTAT, "Put on your big boy pants and accept the agreement"
Apple can be a notoriously tough partner to negotiate with. With endless mounds of cash in the bank and an ever growing userbase, the company can understandably wield a tremendous amount of power during contract talks.
A prime example of this is Apple's recent partnership with GT Advanced Technologies (GTAT). GTAT, as you might recall, filed for bankruptcy a few weeks ago. In the wake of that, GT Advanced COO Daniel Squiller recently submitted an affidavit to the court which illustrates just how tough a negotiating partner Apple can be. To put it mildly, negotiating with Apple is not for the faint of heart.
According to Squiller, "Apple embedded itself in the operations of GTAT at the Mesa Facility" that forced GTAT to "divert an inordinate amount of its cash and corporate resources to its operations at the Mesa Facility." As a direct result, Squiller notes that GTAT's viability as a whole was impacted.
Apple also embedded itself in GTAT's facility in Salem, Massachusetts that took on the function of an experimental research and development center for the Apple project. Consequently, GTAT has been unable to use that facility for other revenue streams.
The affidavit further reads:
With a classic bait-and-switch strategy, Apple presented GTAT with an onerous and massively one-sided deal in the fall of 2013. At the outset of negotiations, Apple had offered GTAT what would have been the company's largest sale ever; an order for 2,600 sapphire growing furnaces. In that scenario, GTAT would operate teh furnaces on Apple's behalf, but Apple would own the furnaces. Apple's size and prominence make it the ultimate technology client to land. The deal with Apple was viewed as a potential game-changer for GTAT.
In hindsight, it is unclear whether Apple ever intended to purchase any sapphire furnaces from GTAT. Indeed, after months of extensive negotiations over price and related terms, Apple demanded a fundamentally different deal: Apple no longer wanted to buy furnaces from GTAT; instead, Apple offered an arrangement that required GTAT to borrow money from Apple to purchase furnace components and assemble furnaces that would be used to grow sapphire for Apple. The new structure, as a contract matter, shifted all economic risk to GTAT, because Apple would act as a lender and would have no obligation to purchase any sapphire furnaces, nor did it have any obligation to purchase any sapphire material produced by GTAT. At the same time, Apple constrained GTAT from doing business with any other manufacturer in or supplier to the consumer electronics market, subject to extreme penalties...
Of course, the counter to this is that GTAT entered contract negotiations with Apple at arms length and no one forced the company to sign anything it didn't want to sign.
GTAT's deal with Apple was a calculated risk. Of course Apple wouldn't blindly agree to buy a product without first testing it to see if it met its technical specifications. For GTAT to complain about this fact seems rather strange given its position as a sophisticated company more than capable of negotiating complex and large-scale contracts.
In any event, the best portion of the affidavit relays that when GTAT was unsure about signing on the dotted line, Apple said, "Put on your big boy pants and accept the agreement."
Another gem: Apple told GTAT that there's no incentive for them to negotiate because they don't negotiate with suppliers.
AppleInsider has more on some of the details surrounding Apple's secretive supplier agreements over here.
