Shares of Apple Inc. supplier GoerTek Inc.
dived for the second straight day, after the Chinese electronics maker said a major overseas client had asked it to stop producing a client’s product. Investors are now worried that more orders will be terminated, analysts say.
The stock tumbled 10% on Thursday, the largest one-day fluctuation allowed on the Shenzhen stock exchange. This followed a 10% slump on Wednesday.
The selloff came after GoerTek said it received notification from an “overseas major customer” asking it to suspend the production of a smart acoustic product, which analysts believe to be Apple’s
AirPods Pro 2. The company expects the pause in the order to cut its 2022 revenue by up to 3.3 billion yuan (US$455.7 million). Other orders for the client are ongoing normally, GoerTek said.
While the estimated revenue reduction only makes up 4.2% of GoerTek’s annual sales, the suspended order pause left investors asking if anything else is coming.
“The bigger market concern is whether the impact would extend to other products with the same customer, and the implications regarding Goertek’s capabilities,” Jefferies analysts led by Nick Cheng said in a note. The bank estimates that Apple contributed to nearly half of Goertek’s total revenue last year.
The suspension may also make it harder for GoerTek to win new orders. “It may lower the possibility or postpone the timing of a new wearable [device] project win,” said Daiwa analysts Kylie Huang and Wayne Lin.
Both Daiwa and Jefferies analysts believe that GoerTek is still working with Apple to resolve the suspension, which their industry checks suggest is a result of technical production problems. Daiwa reckons GoerTek may be able to resume normal production of the product in the second half of 2023.
“We will closely monitor whether GoerTek successfully fixes this issue in the next two weeks,” Jefferies said.
Write to Yifan Wang at firstname.lastname@example.org