The Tech Bet

Strained relationship for Apple and GT Advanced

Watch out, lawsuits may be flying

On the heels of GT Advanced Technologies' filing for bankruptcy protection and its plans to close an Arizona plant that had been expected to make glass screens for the iPhone, talk of possible legal claims aimed at Apple are also making headlines.

The tech giant loaned GT Advanced $578 million to build the facility in Arizona but GT said it was burning through $1 million per day to keep it running.

GT Advanced makes sapphire crystal display screens that many had expected to be used in the iPhone 6 and 6 Plus. Numerous analysts and consumers expressed surprise when the new phones were made without the sapphire displays.

Corning's CEO says its Gorilla Glass is superior to sapphire crystals for use in devices like Apple's iPhones.
Source: Corning Inc.

Due to confidentiality agreements with Apple, GT Advanced could not publicly say why it needed bankruptcy protection.

"Maybe GT Advanced didn't reach some technical milestones that were required for Apple to pay the rest of its loan out in order for GT Advanced to finish the production," said Mark Spoonauer, editor in chief at Laptop Mag.

"Although sapphire crystal is supposed to be stronger and more scratch resistant than Gorilla Glass, it's possible that Apple went in another direction because GT Advanced couldn't meet Apple's specifications. Or it could have been a matter of simply not being able to produce enough panels to meet Apple's demands," said Spoonauer.

GT Advanced is seeking to end 13 contracts with Apple, meanwhile Apple said it was going to try and keep the Arizona facility and its jobs alive as it meets with state and local officials.

GT Advanced said it has many claims against Apple, saying the terms of the agreement were "oppressive and burdensome" and it's possible Apple in turn may sue GT Advanced for breaking the terms of its confidentiality agreement.

"I don't think a court case would be a big hit on Apple," said Spoonauer. "Apple is just too large, they'll probably just shrug something like this off and find another supplier. GT Advanced may have a case but I don't think it's going to make that big of a dent," he added.

Even though dealing with Apple may be very lucrative, Spoonauer warns all suppliers to not put "all their eggs in one Apple basket," because just like a big retailer can shift course with suppliers, "so can Apple."

GT said it expects to continue "business as usual" with approximately $85 million of cash on the balance sheet and plans to obtain debtor-in-possession financing.

In response to a request for comment from CNBC, Apple reiterated it was "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."

GT Advanced did not immediately respond to a request for comment.