The saga of Apple's troubled relationship with sapphire maker GT Advanced Technologies continues. Today, the United States Bankruptcy Court of New Hampshire filed a lengthy affidavit (PDF) by GT Chief Operating Officer Daniel Squiller in which the executive details the contract with Apple and the reasons why it fell apart. Chief among his complaints are so-called "bait-and-switch" tactics used by Apple. Over time, the company allegedly shifted most of its financial risk to GT—Apple stood to get a great deal on sapphire displays for iPhones if the partnership went well, but GT would absorb most of the losses if the deal went south (as it eventually did). From the statement:

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...

Throughout the statement, Squiller presents Apple as a harsh taskmaster with almost all of the negotiating power in the relationship, and that the company's deadlines and expectations were unrealistic. According to Squiller, Apple didn't complete the Mesa, AZ facility until six months before it needed to be operating at full capacity; interruptions to electricity and reconstructing parts of the Mesa facility cost GT about three months of time; that Apple's inexperience with sapphire led to further delays and the purchase of inadequate equipment; and that ongoing construction created a "highly contaminated environment that adversely affected the quality of sapphire material."

The entire document is a fascinating read, but if you want the short version there a few particularly important takeaways. First, the contract with Apple does seem to give Apple a lot of power—GT Advanced couldn't sell sapphire to anyone other than Apple and according to Squiller, GT shouldered much of the risk involved. He claims that "Apple [had] no exclusivity obligations to GTAT," that Apple "[had] the right, without compensating GTAT, to cancel a purchase order in whole or in part at any time and reschedule a delivery at any time," and that GT couldn't make any modifications to the specifications or manufacturing processes without Apple's consent (even though Apple could demand mandatory changes to these same things without consulting GT).

We're just getting one side of the story here, but it paints a rather unflattering picture of what dealing with Apple is like for small and mid-size component suppliers. According to Squiller, Apple says it puts similar restrictions and lateness penalties on all of its suppliers—GT execs were apparently told to "put on [their] big boy pants and accept the agreement."

On the other hand, GT and its executives share their part of the blame—Squiller notes that "Apple's size and prominence make it the ultimate technology client to land" and that "the deal with Apple was viewed as a potential game-changer for GTAT." Despite numerous apparent roadblocks and alterations of the deal, GT seems to have forged ahead with the agreement because the potential payout was too big to ignore.

While Apple's status in the consumer electronics industry gives it a tremendous amount of leverage with suppliers like GT, that doesn't mean the company can do anything it wants—a contract, after all, is a contract. The allure of supplying components for a phone that was guaranteed to sell in huge numbers may have made executives overly eager to sign what in hindsight was an onerous deal. At this point, we've only heard GT's side of the story and we should have a clearer picture of what happened once we’ve also heard Apple’s side.

Update: Apple has sent us another document filed today (PDF) that responds to the claims in Squiller's affidavit.

Along with Apple's responses, the statement reiterates that Apple and GT have decided to part ways amicably at this point, but notes that "much of the Supplemental Squiller Declaration goes far beyond what was reasonably necessary to describe [GT's] current financial situation and instead includes gratuitous characterizations of Apple's motives, negotiating tactics, and business practices." As a condition of the settlement between Apple and GT, the Squiller affidavit has been stricken from the record. Apple's filing, too, is worth reading in its entirety, but here are the most pertinent excerpts:

...[Squiller's] statements are intended to vilify Apple and portray Apple as a coercive bully. In addition to being untrue and harmful to Apple, these statements are not necessary to understand [GT's] current financial condition or their motions before the Court. Apple's image and reputation will be harmed if the defamatory statements alleging that Apple sought to dominate and control, strong-arm, or take advantage of its suppliers are disclosed... Part of Apple's brand is its ability to manufacture high quality, cutting edge products. To manufacture its high quality, cutting edge products, Apple maintains a complex supply chain, including relationships with a large number of suppliers and counterparties. Defamatory statements about the manner in which Apple treats its suppliers would make it more difficult for Apple to deal with its suppliers in the future.

Also, as we noted above: