Apple AirPods Maker GoerTek Dives After Revealing Major Client Loss

GoerTek Inc. plunged its daily limit of 10% after the maker of Apple Inc.’s AirPods disclosed it suspended production of an audio product from “a major overseas customer.”

The Chinese company, which named neither the client nor its product, warned that decision could hit as much as 3.3 billion yuan ($456 million) of revenue in 2022. GoerTek, which also supplies Samsung Electronics Co. and Xiaomi Corp., said its relationship with other customers remain normal.

GoerTek’s revelation ignited speculation that Apple, which is grappling with both flagging electronics demand and production disruptions, may be retooling a vast supply chain centered on China. Speculation in the market has centered on whether GoerTek might have failed to meet Apple’s typically stringent specifications.

“We estimate this could be AirPods Pro 2 orders from Apple,” Citigroup Inc. analysts including Mark Li wrote in a note, double downgrading the stock to sell from buy. “We believe competitor Luxshare (our top pick) could conversely benefit from market-share gains, as we estimate it is a key supplier on this product.”

Luxshare Precision Industry Co. climbed as much as 4.6% before ending little changed on Wednesday. Another GoerTek rival AAC Technologies Holdings Inc. surged as much as 15% in Hong Kong before paring gains to 3.4% at the close. AirPods assembler GoerTek representatives didn’t immediately respond to requests for comment, while Apple wasn’t immediately available for comment after regular hours.

Apple and its peers are grappling with faltering demand for electronics worldwide, as consumers cut spending in the face of a potential economic downturn. It expects to produce at least 3 million fewer iPhone 14 handsets than originally anticipated this year, Bloomberg News has reported.

The US company is also dealing with unexpected issues across its global supply chain, including a lockdown of its main iPhone production facility in central China.

“It is likely that the overseas customer is Apple, and the key product is AirPods Pro 2,” UOB Kay Hian analysts wrote. “Market rumours indicated that it was due to GoerTek missing the production yield target at the assembly plant,” they added, citing unverified speculation circulating among market participants.