Former Apple Supplier OFilm Anticipates Up to $10M in Q3 Losses

ofilm
(Source: OFilm)

On Wednesday night, Chinese optical and optoelectronic component manufacturer OFilm announced that it expects net losses of 58-70 million yuan ($9.01-$10.88 million) in the third quarter, compared to profits of 237 million yuan during the same period last year. It is estimated that total net losses for the first three quarters of this year will be 24-36 million yuan, while the same period last year saw 739 million yuan in profits.

The impact of being kicked out of Apple’s supply chain still haunts the firm. OFilm was originally known as a supplier of camera modules for Apple Inc. until the second quarter of this year. According to its financial report, Apple accounted for 22.51% and 30% of the company’s revenue in 2019 and 2020, respectively, with corresponding revenues of 11.7 billion yuan and 14.5 billion yuan, making it the second-largest and largest customer of OFilm in those years, respectively.

In July 2020, the U.S. government listed Nanchang OFilm Technology Co., Ltd., a subsidiary of OFilm, on the “Entity List,” which is essentially the “blacklist” of U.S. export control. The listed entities need to obtain a license issued by the United States Department of Commerce before they can purchase American technology products.

After that, on March 12, 2021, Apple unilaterally terminated its cooperation with OFilm. The impacts of this incident have appeared one after another this year. In the first half of this year, OFilm achieved operating income of 11.742 billion yuan, down 49.96% year-on-year, and the net profit attributed to the parent company’s owner was 34 million yuan, down 93.25% year-on-year.

Except Apple, the impact from Huawei also led to a sharp drop in shipments of several products of OFilm. Huawei was the company’s biggest customer in 2019. In the second half of 2020, due to the cut-off of chip supply, Huawei’s shipments of mobile phones and other products dropped sharply, resulting in a decline in its order demand for OFilm.

Besides, OFilm also said that the COVID-19 pandemic has caused the global chip supply to be tight and the supply cycle to be lengthened, which led to the weakening of customer demand for some end products and adversely affected the company’s operating income and profits.

According to a report by Chinese media outlet Egsea, OFilm, which lost orders from major customers, is looking for another way out. The company said that while developing its core business, it is actively extending optical and optoelectronic businesses in new fields such as VR/AR, industry, medical care and sports cameras. At present, the new businesses are still in the introduction period or investment and construction period.

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On the evening of October 13, OFilm also announced that the company plans to increase its capital to Anhui Jingrun Technology Co., Ltd., a wholly-owned subsidiary of OFilm, by 290 million yuan, accounting for 3.22% of the audited net assets of the company in the latest year. OFilm said that this investment aims to further strengthen the company’s layout in the optical field and improve the businesses of smartphones and smart cars.