Apple v Corning

By

Colin here.

You may recall that Apple was supposed to switch to Sapphire glass with the iPhone 6. It was working with GT Advanced on this project, as we now know. GT Advanced declared bankruptcy when Apple decided at the last minute to go back to Corning Gorilla Glass.

 

Sapphire is not necessarily better than Gorilla Glass because it is very brittle and it shatters easily. While it is less likely to scratch, it breaks easily when dropped.

What if Apple’s plan all along was not to use Sapphire? What if they were just using GT Advanced as a pawn to get better pricing and better quality from Corning?

Corning was in a power-position that gave them market power. No other company could make smartphone screen glass in the quantities and at the quality that Apple needed. Apple was locked in and Corning knew it. If Corning decided to raise prices they could do so and squeeze Apple.

The only way out of such a pincer grasp is to be able to create a credible threat that you can pick up and switch suppliers…for good.

So, consider the idea that so much was at stake that Apple could “invest” hundreds of millions of dollars into GT Advanced. If their wild-eyed president could actually deliver what he promised (better, stronger glass) then Apple had a lock on it. But even if Apple didn’t expect GT Advanced to actually pull off this miracle Apple might as well be money ahead. Spending a few hundred million dollars in order to panic Corning might have been a brilliant supply-chain move. And, Tim Cook is an operations and supply-chain guy much more than he is a visionary.

So at the very last moment Apple tested GT Advanced. They were ambivalent about which way they went. Corning was by this time in a panic mode and would do anything to keep the Apple account. Apple came to them and indicated that if they could drop their prices and promise a new generation of glass within a couple of years that Apple would consider ditching its GT Advanced relationship. Overjoyed and static at the win-back Corning would say “Yes!” thus, Apple would have perfectly gamed them.

Meanwhile, GT Advanced went bankrupt. The wild eyed GT Advanced president “bet the company” on a technology that he couldn’t deliver. And, he mis-played his cards into thinking that Apple would have no choice but to compromise when the quality of the Sapphire wasn’t up to the standards he had promised. Yes, he would have been “played.”

I am not saying this is precisely what happened. But it fits with all of the facts as I know them to be. It certainly would put Apple in a “win-win” position replacing a “loose-loose” position.

It’s interesting to think about, anyway.

Colin Berkshire