Goertek, a Chinese audio component maker and assembler of Airpods for Apple, has updated its annual revenue fall by 60% from its last forecast.
South China Morning Post, citing a recent filing to the Shenzhen exchange, reported on December 5 that Goertek previously projected nearly $670 million (4.7 billion yuan) for this year. It’s now expected to earn as low as $242 million (1.7 billion yuan).
The adjustment came after a “major overseas client” asked it to pause production last month.
Goertek’s statement shows that production under this contract will not resume for the remainder of this year. Therefore, it would lose nearly $470 million (3.3 billion yuan) in revenue this quarter.
Kuo Ming-chi, an analyst at TF International Securities, disclosed that after Goertek was requested to stop production last month, Apple chose Luxshare ICT as its primary supplier for Airpods Pro to prepare for the year-end holiday sales rush.
The filing discloses that nearly 90% of Goertek’s revenue stems from its top 5 clients, with the largest client, Apple, making up over 40% of total sales.
Goertek said that its management team had been actively in talks with the client to solve the suspension of production issues.
Many analysts, including Kuo, believe that the unnamed client was Apple and the product referenced was the AirPods Pro 2. The suspension has been “more likely due to production issues rather than demand issues.”
As reported by SCMP, Goertek is a powerful high-tech supplier. Its most recent annual report shows the company registered over 3,400 patents in 2021. It has filed a total of 25,800 patents, about 15,500 of which were issued by the Chinese patent agency.
Over the years, Beijing has encouraged and subsidized enterprises to file patents. As a result, the number of applicants went through the roof, and China has dominated international patent applications.
From 2011 to 2017, Goertek saw its patents spike from 206 to well above 3,000, with considerable subsidies. In 2019, the Shandong-based tech firm received about $1.8 million (13 million yuan).
But Goertek still has to rely on Apple strongly for nearly 50% of its revenue. Thus, it ended up with a substantial loss of income as Apple changed its requests last month.
Goertek’s current dilemma raises concerns about the Chinese communist regime’s criteria for choosing qualified patent applicants, especially regarding product quality.
Data from China National Intellectual Property Administration indicates that the country needed up to 15 years to register its first 1 million patents. But to reach the 2 and 5 million patent marks, the completion time was incredibly shortened, and the figures were four years and one and a half years, respectively.