Apple in deal to keep plans secret

Apple has reached a settlement with bankrupt sapphire supplier GT Advanced Technologies to keep the two companies' contracts secret, after the iPhone maker feared its product plans would be made public.

If the settlement is approved by a court, Apple will lose a key US supplier of a material vital to the iPhone and forthcoming Watch but retain the secrecy around its product plans that GT had threatened to break open during its bankruptcy proceedings.

Reports from a court hearing in Springfield, Massachusetts, on Tuesday by Reuters and others suggest that the settlement will allow GT to wind down the sapphire manufacturing facility in Mesa, Arizona, which only a year ago was established as part of a landmark deal with Apple.

GT surprised Apple and its investors by abruptly filing for bankruptcy earlier this month, under circumstances which are still shrouded in mystery.

Under the settlement, GT will sell more than 2,000 furnaces it had planned to use to make sapphire for Apple. The proceeds of that sale will go towards repaying $439m in prepayments which Apple had made to GT over the past year. The final tranche of Apple's planned $578m loan, which had been due by the end of this month, was never paid to GT.

The settlement was referenced in a court filing on Tuesday that sought to retain the court's seal on contracts and other private documents filed earlier in the case. Maintaining confidentiality of GT's "description of its relationship with Apple" was a condition of the settlement, the filing said, which had been "resolved consensually".

If approved, the motion asks that all paper and electronic copies of the two companies' contracts be destroyed by GT, its creditors, Apple and their advisers, and not disclosed to "any third party".

However, further details of the reasons for the bankruptcy may yet emerge at a hearing in the bankruptcy court later next month.

When Apple launched its iPhone 6 last month, the smartphone did not feature a sapphire screen as many analysts had predicted after the deal with GT. It is not clear whether Apple decided not to proceed with the design, triggering GT's difficulties, or if GT's failure to deliver on its sapphire supplies prompted a last-minute design change, as some reports have suggested.

Apple may be able to look to other suppliers, such as Rubicon Technology, to provide sapphire for its Touch ID fingerprint reader and the face of its Watch, which is slated for release next year. Apple has previously used Corning's "Gorilla Glass" for the iPhone's screens.

In the meantime, GT faces a class-action lawsuit over its failure to disclose alleged problems with satisfying Apple's contractual requirements. Questions have also been raised about the timing of stock sales earlier this year by GT's executives.

GT has called its supplier agreement with Apple "oppressive and burdensome", including a $50m penalty imposed by the iPhone maker if any details of its contracts and plans leaked. It had previously requested that details of its agreement be made public in the interest of creditors and shareholders, which Apple opposed.

Other Apple suppliers have been watching the case closely.

Neither Apple nor GT commented beyond the court filing.

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