(Yicai Global) Nov. 9 -- Shares in Goertek plummeted by the exchange-imposed limit today after the Chinese maker of US tech giant Apple’s headsets said that one of its main foreign customers is terminating the production of a smart acoustic product. The order was for AirPods Pro 2s and has been given to rival Luxshare Precision Industry, an analyst said.

Goertek’s share price [SHE:002241] sank 10 percent to trade at CNY20.72 (USD2.86) as of 1.15 p.m. China time, reducing its market capitalization to CNY70.8 billion (USD9.8 billion). While Luxshare’s stock [SHE:002475] was trading flat at CNY32.03 (USD4.42). Earlier in the day it jumped 4.6 percent to hit CNY33.49.

The lost contract will reduce Goertek’s revenue by as much as CNY3.3 billion (USD455.3 million) this year, around 4.2 percent of the firm’s revenue last year, the Weifang, eastern Shandong province-based company said yesterday.

No reasons for the cancellation were given, but other projects with the client continue as usual, it said, adding that it is still evaluating the incident’s impact on its business.

The order was for AirPods Pro 2s and has been given to competitor Luxshare, Kuo Mingchi, analyst at TF International Securities, said in a research report today. Dongguan, southern Guangdong province-based Luxshare has plenty of extra production capacity and is now the only foundry in the world assembling the AirPods Pro 2.

There are probably problems with Goertek's production, because California-based Apple did not cancel the order due to a lack of demand, Kuo said. It is not known yet if or when the order will be restored nor how this will affect Goertek’s supply of other Apple products, he added.

Goertek lost the AirPods Pro 2 contract mainly because of quality issues, The Paper reported today, citing two industry insiders.

Goertek entered the Apple supply chain in 2010 and became the world’s second-largest AirPods assembler in 2018, when it was granted production rights for 30 percent of total output of the wireless in-ear headphones. Later, it became an exclusive AirPods Max foundry.

Over 90 percent of Goertek’s revenue came from overseas clients in the first half at CNY39.7 billion (USD5.4 billion), with Apple accounting for 40 percent of total revenue, according to the company’s semi-annual financial report. Smart headsets accounted for 28.3 percent of all earnings at CNY12.3 billion (USD1.7 billion).

Editor: Kim Taylor