Apple Sticking With Arizona Plan After Supplier Falters

Arizona Jobs
Unemployment in the Mesa-Phoenix-Glendale metropolitan area. (Source: U.S. Bureau of Labor Statistics)

Apple Inc. has told officials in Mesa, Arizona, that it’s committed to bringing jobs and manufacturing to the area even after the bankruptcy of GT Advanced Technologies Inc., a supplier that was going to make sapphire screens for iPhones in the city.

“They’ve indicated their commitment to us: They want to repurpose that building and use it again,” Mesa City Manager Christopher Brady said in a recent interview. Apple has said it’s focused “on preserving jobs in Arizona” and promised to “work with state and local officials as we consider our next steps.”

Spokeswomen for Apple and GT Advanced declined to comment for this story.

Mesa, a city of 450,000 on the outskirts of Phoenix, is trying to bounce back after GT Advanced’s sudden shutdown last month of a factory that employed more than 700 people. Apple touted the facility as a milestone in its efforts to bring manufacturing back to the U.S., after years of relying on Asian suppliers to build the company’s iPhones, iPads and Mac computers.

“Apple could’ve invested in a facility literally anywhere in the world,” said Mesa Mayor John Giles, who is planning to visit Apple’s headquarters in Cupertino, California, to show the city’s support. “There’s a reason they came here, and none of those reasons have changed.”

Apple’s arrival last year was seen as a sign that a recovery was under way in the city, where a new stadium for the Chicago Cubs annual spring training camp opened and a light-rail line is being built going through downtown. Mesa is still recovering from the 2007 housing bust, which eliminated 300,000 jobs in the Phoenix metro area, according to the city. Mesa’s unemployment rate declined to 5.5 percent in September, from 8.7 percent during the same month in 2010, according to PolicyMap.

Desert Development

The factory’s developer, DMB Associates Inc., still has long-term plans for the desert patch, including 20 million square feet of non-residential space and as many as 15,000 houses. The development, called Eastmark, already has 270 homes built and more than 100 are under construction, according to DMB.

“We’re disappointed at the news, but it’s a small piece of a much bigger economic engine that we’re all working on,” said Karrin Taylor, an executive vice president at DMB Associates. “We have a lot of land to plan and develop. We’re not going to let a hiccup stop us.”

Even before the housing crisis, the Mesa community had experienced setbacks. The facility that Apple bought a year ago to house GT Advanced’s operations had been a failed solar panel factory, which in turn was built near a former General Motors test track.

Trade Zone

Mesa and the state of Arizona fought hard to entice Apple to the more than 1.3 million-square-foot factory. Community leaders worked to meet Apple’s demand that the facility use 100 percent renewable energy, and agreed to construct a new power substation for the plant. Apple also benefited from the state’s decision to designate the area around the building a foreign trade zone, cutting potential property taxes by more than 70 percent.

Apple set up GT Advanced in the factory with a $100-a-year lease and commitment of $578 million in prepayment loans. Filings by GT Advanced unsealed Nov. 7 paint the terms of its deal with Apple as “onerous and massively one-sided.” GT Advanced shares have slumped more than 90 percent since the bankruptcy filing.

Encouraged by Apple’s decision to buy the factory and signs that the economy was turning around, Shelley Nikolich’s family decided to expand their pizzeria in July, buying a downtown building and renovating it for more than 60 seats.

“We were all so excited when they came,” said Nikolich, who was at the Margaritas Grill, a downtown restaurant, last month for an after-work mixer with other small-business owners. “I’m sorry that they’ve had their troubles. I still don’t know what happened.”

Supply Chains

The stumble by GT Advanced, a small supplier that bet the company on its ability to meet Apple’s demands, underscores the challenges of rebuilding the U.S. manufacturing base, said Barry Broome, head of the Greater Phoenix Economic Council.

The U.S. economy has added 500,000 new manufacturing jobs in the past four years after losing 5.5 million such jobs from 1998 to 2013, the Labor Department said in February.

“We’ve eroded our manufacturing base, so we don’t have investment grade supply chains anymore so now our suppliers are little guys,” Broome said in an interview. “GT, from an execution standpoint, was in over its head and Apple does what Apple always does: Demand results, on time and for the number they agreed upon and the company couldn’t do it.”

Silicon Desert

GT Advanced isn’t the only technology company that stumbled in an attempt to breathe life into the Phoenix region, which bills itself as the Silicon Desert. Jabil Circuit Inc., an electronics company, closed a factory in nearby Tempe last year, eliminating about 1,400 jobs. Motorola, once Mesa’s largest employer, began shutting its plants starting more than a decade ago.

After the housing bust, “the economy then wiped out entire families because of the lack of diversity in the workforce,” Craig Henry, chairman of the city’s Chamber of Commerce, said in an interview. He owned a temporary employment agency at the time and recalled the pain inflicted on families.

“In our temp agency, our lobbies were full at the time,” he said. “It’d be entire families come in because the mother worked at a title agency, the daughter worked at a mortgage company and the son was a framer and it was right before Christmas and they’d take any job.”

Giles, Mesa’s mayor, remains confident that the area will appeal to others even if Apple goes another direction.

“We’re still at the beginning of this story, rather than at the end,” Giles said.

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