Goertek revises 2022 revenue estimates down by 60pc

Chinese audio components maker Goertek, which makes AirPods for Apple, has revised its annual revenue estimates down by up to 60 per cent after a “major overseas client” requested it suspend production, dealing a blow to a supplier that is too dependent on one client, analysts said.

The Shandong province-based company said in a filing to the Shenzhen exchange on Saturday that it had lowered its annual revenue estimates to as low as 1.7 billion yuan (HK$1.88 billion) from 4.7 billion yuan earlier.

Goertek said that it did not expect to resume production of the smart acoustic product this year following the client’s request. The company first revealed the information in early November, saying it would hurt revenue by 3.3 billion yuan in the fourth quarter but added that a comprehensive “impact on the company’s business performance is still under review”.

Many analysts, including TF International Securities’ Kuo Ming-chi, indicated that the client was Apple and the product involved was the newly released AirPods Pro 2, whose assembly has been paused “more likely due to production issues rather than demand issues”.

Jefferies analysts also noted that production of AirPods Pro 2 was affected, adding that there were no other order cuts or plans to remove Goertek from Apple’s supply chain.

Goertek started assembling Apple’s highly sought after AirPods Pro series wireless earbuds in 2020.

Kuo said since Goertek was asked to suspend production last month, Apple shifted the assembly to Luxshare ICT, its primary AirPods Pro supplier, to fill in the demand before the holiday shopping season.

Goertek’s plunging revenue offers a cautionary tale for Chinese suppliers who are too reliant on a few major clients.

Financial reports showed that Goertek’s clientele is highly concentrated, raising investors’ concerns over its diversity and profitability. Goertek earns nearly 90 per cent of total revenue from its top five clients, while its largest client made up more than 40 per cent of overall sales.

Goertek said in the filing that its management team had been actively engaged in communications with the client for a solution.

The Goertek assembly hiccup comes at a time when Apple is facing other supply chain disruptions on the mainland. Foxconn Technology Group’s plant in Zhengzhou, the world’s largest iPhone factory, saw an exodus of workers followed by violent clashes between temporary workers and local police over allowances and other issues.

Apple, which said it would ship fewer iPhones in its Pro series, has asked other suppliers in China to ramp up production and expedited plans to shift part of the production outside the country, according to a report by The Wall Street Journal.