What caused GT Advanced Technologies to die without warning – Small Company Affliction and Original Sin
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October 20, 2014GTAT Bankruptcy
GT Advanced Technologies (GTAT) died suddenly and inexplicably after being on top of the world just a couple of months ago. The main factor behind the company’s death was a liquidity crisis. One of the biggest risks with small companies and start-ups is that the company runs out of cash before its technology or products can mature. This is the reason why most of the solar start-ups have gone bankrupt in the last few years in USA. Nanosolar, Solyndra, Miasole… the list is very long and the main reason is the company running out of money. Most of these companies had very promising technology and products, but the markets outpaced them before they could expand and make money.
GT Advanced made a lot of money in the go-go years of solar expansion by the Chinese solar panel makers who expanded like there was no tomorrow. GT Advanced which supplied wafer and polysilicon equipment made tremendous revenue and margins, till the solar industry went into a severe down cycle in 2011 and 2012. Orders completely dried up and most of the western solar equipment makers either went bankrupt or into a deep hibernation firing thousands. GT Advanced was one of the survivors diversifying into the new upcoming sapphire industry. The company was doing reasonably well selling equipment to sapphire ingot makers in the Chinese industry and making investments into new areas.
The company’s management was good but it lost out big time after it got carried away with the Apple deal. The company agreed to onerous conditions to become a sapphire supplier to Apple. It also went into sapphire production which was not its core area. Its major strength was making equipment and not using the equipment to make products. According to industry sources, the yield of its new equipment was too low and it ran into cashflow problems very soon. A new technology takes time to mature but GTAT did not have the time, given the massive investment it had made in the new Arizona factory. It had taken almost a billion dollars in loan and prepayments.
With low yields, Apple asked for its money back and GT had no way to pay it back. The company just went kaput as it lost everything in one big gamble with Apple. I hope an investor comes and plucks the company out of its trouble by running it, given its great technology and people. AMAT is one such company which could buy it out. There will be other Asian investors who would love the technology as well.
US-based sapphire ingot producer GT Advanced Technologies (GTAT) has applied for bankruptcy protection possibly because its HEM technology-based ingot growing process has seen much lower than expected yield rates at only about 40%, according to sources with Taiwan-based sapphire suppliers.
And processing sapphire ingots into display covers smartphones is also unlikely to have reached a high enough yield rate, the sources said. Possibly because of insufficient output and high cost arising from low yield rates, Apple has finally given up using sapphire covers for its iPhone 6 and iPhone 6 Plus, which has plunged GTAT into financial troubles, the sources speculated.