GT Advanced Technologies Inc fka GTAT

[XenaLives]

OK- we know from the emails that the reason the bankruptcy happened was that Apple wanted a lien against all GTAT assets to bail them out financially. Another reason I suspect that the objective was a takeover. There will be people in court Monday who have the ability to value the IP and help negotiate a fair deal. Remember the officers of the company, the Judge, and the Trustee all have a fiduciary obligation to shareholders of a public company.

I've posted these excerpts from Apple emails from Creditors motion to depose before, they clearly indicate that Apple was not being fair to the smaller company:

https://www.kccllc.net/gtat/document/1411916141202000000000001

These emails do two important things -
1) exonerates GTAT insiders accused of "bailing" and selling illegally.
2) unmasks Apples actions as being truly abusive and damaging to GTAT, its credtidors, and shareholders.

Also note that this is just a small sample of literally thousands of Apple documents that creditors committee has gone through.



From page 28 -

It appears that they were simply cramming too much R&D into too little time and GTAT was not the only source of failure, yet they bore all of the risk.

Consumables and Fabrication Line:
-Crucible supply continues to be tight for CQ2, 2014 based on the transition to thinner
crucibles to help with cracking issue.
-Alumina qualification is scheduled to be complete by mid-April (Pengda) and late-April
(Biel)
FAB AREA updates:
-Meyer Burger bricking tools continue to be the key challenge in the fabrication area.- Meyer burger MCP650 tools are running on average at 23 hours vs. the planned cycle time of 10.5 hours. Teams are currently testing out alternate cut configurations to reduce cycle time.
-The first BrickMaster BM860 machine (alternate machine from Meyer Burger, Switzerland) is running at a CT of~ 8 hours. Second machine is being set up in Mesa and will be running in the next week. Apple/GT/MB teams are collaborating to expedite the pallets needed for mounting boules in these machines.
-Apple and GT teams working to finalize plan for fab area expansion to accommodate the additional machines to compensate for longer than planned cycle times.
-Apple team is running trials with Takatori on a new prototype bricking machine in Japan this week. Estimated CT of 13 hours.
- SBE/GSM team also looking into other vendor options for grinding (Lapmaster etc). We' ve also initiated conversation with Fuji/SL as back up option for fabrication in China in case we run of space in Mesa (due to longer than expected process cycle times).

From Page 31 - 34

It's clear that they knew this was not going to happen for the iPhone 6 release - Fall 15 is stated. It appears to me that GTAT was on track for success, but Apple refused to give them the financial support they needed, meanwhile a lot of other business was being lost to GTAT because of their focus on Apple.

Wondering what the "flavors" mean.. Sounds like Apple is wanting variants of sapphire which means breaking new ground for GTAT.

Last paragraph indicates that Apple still hadn't fully decided on specs for material.

Re: Sapphire Update- 8.18.14
From: "Duco Pasmooij" <[e-mail]>
Receivcd(Date): Sun, 24 Aug 2014 00:48:40 +0000"JeffWilliams" <[e-mail]>
Date: Sun, 24 Aug 2014 00:48:40 +0000
Tknow we will meet on Tuesday, but is GTAT concluding that>165kg boules are just not going to work?
No. They still believe that there is a path to 242kg/262kg or higher, but this requires more time. Hardware and process improvements are needed. Exact amount of time needed is TBD. It has already taken so much longer than they expected ...
Do you have to replace the furnaces, or just stick a different size crucible in it?
165kg, 242kg and 262kg boules can be grown in the same furnaces - the ones that were installed in AZ. 165kg uses a 17" crucible. 242/262kg uses a 20" crucible.

On Aug 23, 2014, at 3:24PM, JeffWilliams <jwilliamsuiJ,apple.com> wrote:
I know we will meet on Tuesday, but is GTAT concluding that>165kg boules are just not going to work? Do you have to replace the furnaces, orjust stick a different size crucible in it?
On Aug 22, 2014, at 1:13 PM, Duco Pasmooij <duco(iVapple.com> wrote:
-Denise + Sabih, Tang, Donal Jeff-
Nick and I had a good day in AZ yesterday.
Fab: at 73% golden line yield with a bridge to 90% by the end of Sep. Don Ross et al are doing a nice job with the fab process development.
Growth: no real update beyond the numbers that Tshared earlier this week.
The feasibility analysis of the 165kg-path is not complete yet, but it looks promising. The two pieces that we need to understand:


Redacted
2. Cost. I discussed this with Tom and he needs until Monday to complete his first draft proposal. I expect that it will be unacceptable but will give Sabih and you and update after my conversation with him. He will be in Cupertino on Tue for further discussions.
Deciding on the 165kg direction will have many benefits. Above all, stability of the plan going forward- having a baseline in-hand that we can ship our fall 2015 products with.
Issues that we are facing:
Redacted
Overall, I am encouraged. But a bit nervous about the economics of the 165kg. I will send Sabih and you another update on Monday night after my conversation with Tom.
The rest of our regular onyx update is very light so we will skip it this week.
I suggest that we meet on Tue or Wed to go through this in more detail.
Thanks
duco
On Aug 20, 2014, at 11:08 AM, JeffWilliams <[e-mail]> wrote:
Let's plan to meet on Friday.
On Aug 18, 2014, at 9:43AM, Duco Pasmooij <duco(aiapple.com> wrote:
Jeff, Sabih, Tang -
Find below the weekly sapphire update from the team. To summarize: we had a bad week because the recent 242kg results came in similar to the 262kg data that we had.
• GT has started 210 runs with the furnace hardware modifications - 90 x 165 kg boules and 120 x 242 kg boules. 71 boules processed through fab. Preliminary yield data from boules as follows-
* 165 kg boule yield of 1492 mm/boule (28 boules from Merrimack) and 1438 mm I boule (15 boules from Mesa)
* 242 kg boule yield of 423 mm/boule (10 boules from Merrimack) and 546 mm I boule (16 boules from Mesa)
This means that all the hardware modifications and process changes did NOT have the impact that GT was expecting.
Nick and I will be in Arizona on Thu and will review the status with the GT in person. Also, we are starting to work on a feasibility analysis of the 165kg boules for initial ramp: the cycle time for 165kg boules is 20 days (vs 30 days) so this could yield us an average of 2100mm/furnace per month, or up to 3,000 mm/furnace per months if the 165kg process can be improved to 2,000mm/boule. The cost structure is obviously an issue and that is what we are trying to understand.
More on Friday. Let me know if you have any questions in the mean time.
duco
Begin forwarded message:
From: Jeet Shah <[e-mail]>
Subject: Sapphire Update- 8.15.14- DRAFT Date: August 15, 2014 at 8:52:55 PM PDT
To: Duco Pasmooij <[e-mail]>
Cc: Vashist Vasanthakumar <[e-mail]>, Palani Chinnakaruppan <[e-mail]>, Richard Comer <[e-mail]>, Ameet Kamat <[e-mail]>
I Jeet
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * ~
Exec Summary:
• 4,760 boules out in Mesa of which- 1,545 Un-cracked, 3009 processable (63%), 1,751 not processable.
• GT has started 210 runs with the furnace hardware modifications - 90 x 165 kg boules and 120 x 242 kg boules. 71 boules processed through fab. Preliminary yield data from boules as follows-
* 165 kg boule yield of 1492 mm/boule (28 boules from Merrimack) and 1438 mm /boule (15 boules from Mesa)
* 242 kg boule yield of 423 mm/boule (10 boules from Merrimack) and 546 mm/boule ( 16 boules from Mesa)

• 683 (of2075) furnaces in growth as of 8/14. 1391 furnaces were idle waiting for the hardware modifications. The furnace upgrades will be an ongoing activity and we will have the upgrade schedule for all furnaces from GT next week.
• Lens has started processing material for the Onyx Mega build 1.5 for qualification of the different "flavors" of material to characterize GT's hardware/recipe changes per the plan from PD &MD.s
• MD team working with Biel and Lens to kick-off golden line to start driving downstream yield improvement. Plan to be finalized this week.
• GTs supply estimate is now 25M mm for 2014 compared to previous plan of38M. GT is still assuming they will hit 3300mm/boule by Sept. Details in the GT Supply Update section below.
Shipment Status:
• GT shipment status as below- <PastedGraphic-19.png>
Note-
• Usable mm from GT assumes bubbles are counted at 25 microns, includes Lineage and some Lineage Decoration from earlier shipments.
GT SupplY Update:
• GT' slatest supply plan for 2014 below-
<PastedGraphic-8.png>
Note-
• 23.28M is based on Apple calendar cut-off for Dec wk 4
• The mm/boule assumptions are listed by month
• New supply plan to be available after finalized the schedule for roll in offurnace modifications
Development Status:
• GT and Apple teams are disappointed by the poor yields on the first round of 242 kg boules with the furnace modifications. Several improvement actions are under-way - <PastedGraphic-21.png>
• PD and MD teams working with GT on plans for qualification of the "flavors" of raw material GT plans to produce.
• Schedule for additional data points on 165 kg and 242 kg boules as below - <PastedGraphic-13.png>

From page 35 -

Note - there may be some transcription errors in my posts because I had to import the document into another application in order to cut and paste.

It is abundantly clear that without an amended contract GTAT could not continue to fund Apple's R&D.

Fabrication update:
• GT is currently hand to mouth on boules going into fabrication due (1) km rate of processable boules. 242 kg boules processable rate 65% (2) We stopped loading furnaces from 7/20. GT is only loading DOE runs in low quantities and until the MP growth plan is finalized we will continue to be hand to mouth in fab through the end of August
• First Pass Yield is ~ 6 0 % as tracked on golden line. the top 2 re-work items are (1) Haze (2) Perpendicularity which are the key focus areas of the SBE team.
• High amount of rework at cropping due to large % ofLD in bricks and perpendicularity fallout SBE team
focusing on reducing this rework and yield loss.
• Apple MD team working with GT on the following improvements for the Golden Line -
* Approved modification to wire saws for brick thickness change to reduce variation in grinding process and to help increase yields. DOE' s on-going on the golden line. We have started cutting wider bricks and now the down stream process is being dialed in specifically grinding (grind to height)
*Process modification to leave the epoxy on after bricking to reduce chipping yield loss by avoiding the current cleaving process for epoxy removal has been implemented on the golden line.
* Inspection system to measure f1atness ofthe brick at grinding to help reduce the rework for haze at the lapping stage kicked ofT New Solarius inspections system installed. GT personnel trained and data being collected to help Grinding & Polishing station optimization.
Facilities:
• A total of 2075 furnace slots (through Mod 4) have been turned over to GT and all furnaces have been installed.
• Mod 5 turnover to GT was planned for July 24th, however GT will be moving into
this area in August This will accommodate the last 60 furnaces (total of2135 in
Mesa).
• GT/N team working on the new fabrication area "Clean Slate" layout to
accommodate the additional bricking and grinding machines. Targeting to complete this by end of August
<PastedGraphic-11.png>
CONSTRUCTION STATUS:
<PastedGraphic-12.png>
Costs: NO UPDATE FOR THIS WEEK
Regards,
Jeet

OK - Page 38 Apple's intent becomes apparent here.

Unconscionable is the only word I can use to describe their dealings with GTAT. IMO they were looking for leverage to take the company over.

Apple should put on its big boy pants and make GTAT, its creditors, and shareholders whole.

Re: Response to GT Proposal
"JeffWilliams" <[e-mail]> Tue, 23 Sep 2014 22:24:27 +0000"Duco Pasmooij" <[e-mail]>
"Sabih Khan" <[e-mail]>, "Donal Conroy" <[e-mail]>
Tue, 23 Sep 2014 22:24:27 +0000

See below

On Sep 23, 2014, at 7:08AM, Duco Pasmooij <[e-mail]> wrote:
Sabih, Jeff-
I spoke with Tom G last night. Here are his concerns:
1. Security interest in all GT's assets

We requested:
"For consideration for funding the $50m of the prepayment in Oct, GT Corp. to grant Apple Inc. a security interest in all (of GT Corp assets and shares (?fits subsidiaries. Apple will file UCCs at its discretion."

Tom feels like we are overreaching here. He is requesting to take this request out of the offer. (My comment - NO KIDDING!)

Donal and I discussed this and feel like we could alter a position slightly: it might make sense to change this request to a security interest until GT meets the stated 262kg conditions to release the final part ofthe 4th pre-payment ($39M), ie:
1. Cycle time for 262kg boule = 31 days or shorter*
2. Good type 1 millimeter material per boule= greater than or equal to 3,300**
3. Exclusion zone- total height (top+ bottom)= 75mm or less
* the average for the most-recent, 50 boules of the time lapsed between commencement of the growth cycle of a 262 kg boule and end of the growth cycle (ie furnace opening).
** the 50-boule average number ofmillimeters of usable goods (type I as described in the SOW), based on current specification. These 50 boules must be the 50 most-recent furnace openings.
***Exclusion zone= as used in the industry, the slice of top and bottom of the boule that would not be used in the Goods or New Goods (both as defined in the SOW).

Are you ok with this change?

I am OK with this

2. Exclusivity waiver for 600 furnaces
Tom indicated that he will struggle with selling 600 furnaces by the end of 2014 in batches of 100 furnaces or less. He indicated that some of the interested parties have paused their expansion due to the absence of onyx(REDACTED) and that he is feeling the impact of this. I am not sure if this a real, but it is what he said. He had also mentioned this when Sabih and I met with him on Sep-11.
I asked him to send us a counter proposal for what it takes to achieve the sales of 600 furnaces in 2014 with a waiver of the exclusivity clause. Once I receive this proposal, we should discuss internally if this could be acceptable.

3. Pricing
He is claiming that he will be losing $1OOM on the $6.41/mm pricing in 2015. I told him that we feel very strongly that we are not going to deviate from the contract pricing and that he needs to validate the 262kg path forward asap.

He confirmed again that he is aiming to have the 262kg recipe and hardware validated by the end of Dec with the goal to roll in the 262kg recipe in all furnaces by the end of CQ 1 (ie "hybrid" plan). We will have a call on Thu night to review the growth status in detail. Will ask GT to reconfirm their supply commitment based on the progress.

He will be reviewing our offer with his board today and we are planning to meet in Cupertino next Thu, Oct-2.

Will send you an update when I learn more.

On a side note, I spent the afternoon at Lens in Hunan today. I had asked them for a plan to do the bricking for us assuming that we send them complete boules from AZ. They had been working on this for a while and were able to show me a draft cost analysis and a locally-built bricking machine. It is unclear how capable their process is and how quickly this will scale, but it was very interesting to see the progress that they have made. Once GT can grow high-quality boules, we will have the option to skip bricking and brick inspection in AZ and ship the entire boule. This will be operationally more efficient for GT and will save us money. The exact savings are TBD - is work in progress.

D
Begin forwarded message:
From: Duco Pasmooij <[e-mail]>
To: Sabih Khan <[e-mail]>, Donal Conroy <donal [e-mail]>, Jeff Williams <[e-mail]>
Subject: Fwd: Response to GT Proposal

Sabih, Donal, Jeff-

I will check in with Tom tomorrow and will let you know what he says.

I will tell him that the offer is final.


Begin forwarded message:
From: Tom Gutierrez <[e-mail]>
Date: September 21, 2014 at 6:36:21 AM GMT+8
To: Duco Pasmooij <[e-mail]>

Cc: Donal Conroy <donal [e-mail]>, Sabih Khan <[e-mail]>, Hoil Kim <[e-mail]>, Raja Bal <[e-mail]>

Subject: Response to GT Proposal

I am very disappointed in the response to our asks. It does not seem that we were successful in outlining the gravity of the situation or the rationale for considering what we believe is a fair path forward as we both work hard to make Onyx a reality.

As we are short on time, unless I hear differently I will present the current apple proposal as the final/ firm offer to my Board next week and recommend a course of action. I suggest we set up a face to face meeting with all interested parties in Cupertino on October 1st to discuss the way forward.

As always if you wish to discuss ahead of time, I will be reachable by cell phone through the weekend.

Tom