GoerTek Loses Apple’s AirPods Pro 2 Order Due to Quality Problems

GoerTek, a China-based Apple supplier, has lost a major order to produce AirPods Pro 2. Ming-Chi Kuo, an analyst at TF International Securities, wrote on November 9 that this development is most likely due to production issues rather than demand issues. To fill the gap, Apple’s initial supplier for the product, Luxshare ICT, has expanded manufacturing and obtained all orders for AirPods Pro 2, becoming its exclusive assembler.

According to a report by Cailian Press, GoerTek has been cooperating stably with Apple, and production was suddenly suspended at this time, which is probably related to the product quality. Shenghao, a senior analyst at Counterpoint, said, “GoerTek’s production has been suspended this time. It is more likely that they have wiped off the glue on some removed components and structural parts and reused them.”

It is also reported that Luxshare is already stepping up its production capacity, and many employees laid off by GoerTek are being directly transferred by bus to work at its Kunshan facility. This news was confirmed by a laid-off employee of GoerTek. “After being laid off, employees can choose to transfer directly to the Kunshan base of Luxshare or the Taizhou base of Lens Technology by the help of intermediary agencies.” In response to the media, Luxshare’s Securities Department said, “Regarding this incident, it is not convenient for the company to comment.”

SEE ALSO: Chinese Acoustic Components Firm GoerTek Rumored to Lose Apple’s AirPods Order

GoerTek issued a risk warning announcement on the evening of November 8, saying that it recently received a notice from a major overseas customer to suspend the production of one of its smart acoustic complete products, which is expected to affect its revenue in 2022 by a maximum of 3.3 billion yuan ($455 million), accounting for 4.2% of the audited operating income of the company in 2021. It also stressed that cooperation with the customer on other product projects is still operating normally. GoerTek’s announcement did not specify the specific name of the customer, but it is believed that the major overseas customer refers to Apple.

Regarding rumors that GoerTek was “kicked out of Apple supply chain” and that the firm faced fines, a spokesperson for GoerTek said, “Please refer to the company announcement for relevant information. Rumors such as ‘the company being kicked out of the supply chain’ are obviously untrue, and the company only suspends one product of the customer according to demand, and other projects are cooperating normally. Rumors, including the billion-yuan fines, are all false information, and the company is still assessing specific losses and will announce them in a timely manner.” Cailian Press also reported that a source close to GoerTek revealed that it had not been kicked out of the supply chain, but had only suspended the production of a single product.

The spokesperson also emphasized the company’s response to this incident. “The company will adhere to the strategy of zero-whole integration, actively promote the business development of acoustics, optics, microelectronics and precision components and smart hardware products such as VR/AR, smart wearable and smart home, and actively expand some new businesses such as automotive electronics.”

GoerTek entered Apple’s supply chain in 2010, supplying acoustic components and wired headphones to Apple, winning 30% of the OEM orders of Apple AirPods in 2018, becoming the second-largest foundry of AirPods in the world.

According to the Q3 report of GoerTek in 2022, in the first three quarters of this year, the revenue of GoerTek was about 74.153 billion yuan, a year-on-year increase of 40.47%, the lowest growth rate since the third quarterly report of 2019. The net profit was about 3.84 billion yuan, up 15.23% year-on-year. Specifically, in the first three quarters of this year, revenue from intelligent acoustic products increased by 3.6% year-on-year to about 19.892 billion yuan.