The curse of Apple's sapphire factory

Bloomberg

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Philip "Phil" Schiller, senior vice president of worldwide marketing at Apple Inc., speaks about the iPhone 6 and iPhone 6 Plus during a product announcement at Flint Center in Cupertino on Sept. 9, 2014. Philip "Phil" Schiller, senior vice president of worldwide marketing at Apple Inc., speaks about the iPhone 6 and iPhone 6 Plus during a product announcement at Flint Center in Cupertino on Sept. 9, 2014.
GT Advanced Technologies, the Apple supplier that filed for bankruptcy on Oct. 6, isn't the first company to find trouble operating the 1.4 million square-foot facility at the edge of the desert suburb of Mesa, Arizona.
Before Apple and GT Advanced agreed to start manufacturing synthetic sapphire at the factory, First Solar had plans to use the facility as a hub for making solar panels. The building was slated to employ 600 people — and many more, if successful — before First Solar's main business soured, and it pulled out in 2012.
Left with a vacant factory the size of two-dozen football fields, Mesa officials scrambled to find a new tenant. As I wrote in February, Apple and GT Advanced agreed to a deal after the city offered tax breaks, built power lines, fast-tracked building permits and got the state to declare the facility as a foreign-trade zone. A local utility agreed to build a solar farm to provide clean energy for Apple. After Apple and GT Advanced agreed to take over the factory, Scott Smith, the mayor of Mesa at the time the deal was announced, put green and red apples all around City Hall.
The celebration was premature. Apple’s iPhone 6 event on Sept. 9 came and went, without a mention of the hardened sapphire screens expected to be used in the new phones. This week, GT Advanced filed for bankruptcy and asked a court for permission to shut down the Arizona factory. The company plans to eliminate 890 jobs in Mesa and at its headquarters in New Hampshire, according to court papers.
The bankruptcy is the latest piece of bad news for the snake-bit area around Phoenix, with an economy tied closely to home construction that’s suffered more than other places since the real estate crash of 2007. Other electronics companies have also moved out of the region. Jabil Circuit closed a factory in nearby Tempe, eliminating 1,400 jobs. Motorola, once one of Mesa's biggest employers, has also closed facilities over the past decade.
Mesa officials, who didn't respond to requests for comment, wanted the Apple-GT Advanced facility to be the foundation for luring more businesses to the region. Adjacent to the Apple factory, plots have been marked for other companies to move in and build factories.
"It's a disappointment because they are trying to convert that area to an industrial park, and it was supposed to be the cornerstone of attracting other entities," says Jim McGregor, a Mesa resident and the founder of technology-industry research firm Tirias Research. He says he noticed GT Advanced was having production problems when he visited the facility several weeks ago.
Apple has said it's working with city officials to preserve jobs in the area, but the bankruptcy bruises the company’s effort to show that it's adding jobs in the U.S. The Cupertino, California, company, which has been criticized for its working conditions at suppliers’ factories in China, touted the Arizona plant for adding 2,000 U.S. jobs in construction, engineering and other areas.
McGregor says the property where the Apple-GT factory is located was originally owned by General Motors, which used it as a testing ground for new vehicles. The carmaker closed down its Mesa operations in 2009, the same year it filed for bankruptcy.
Since then, the city has been trying to lure new businesses. After GT’s bankruptcy, it's unclear whether Apple will continue operating in Arizona. "It leaves open a very high-tech facility for somebody else to come in and possibility utilize," McGregor says.
Given the poor fates of previous tenants, a superstitious buyer may think twice.

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