Apple Store China - CWG Speakers

Apple’s china ban

Apple has lost US$200million from its share price in just two days as markets react to China’s new reported curbs on government iPhones. The government has ordered state employees not to use the devices for work or bring them into the office. Bloomberg reports today that the ban may be extended to state-backed firms in the private sector. 

Apple and Tesla want to be seen as international brands 

Like Elon Musk with Tesla, Tim Cook has wanted to steer Apple clear of corporate nationalism. Nevertheless, Apple is still viewed as an American entity by many in China and the latest ban represents an escalation in ongoing geopolitical tensions. The ban comes just a week after Chinese government backed Huawei announced the release of its new phone, the Mate 60 Pro. The phone is thought to be capable of delivering 5G speeds despite US sanctions limiting Huawei’s ability to source advanced chips. 

It’s unfortunate timing for Apple with its new iPhone 15 launching on 12th September. Analysts had predicted that sales of the new model could make Apple the world’s biggest smartphone maker by volume for the first time. The China ban may yet prevent the company wrestling that accolade from Samsung. Apple sells around 50 million iPhone units in China each year and Bank of America estimates the ban could cost them 10-20% of these sales. China accounts for around 20% of Apple’s overall revenue.

iPhone brand loyalty remains strong amongst Chinese consumers

Some investors are asking whether the impact on Apple is being overblown. So far, anecdotal reports only tell us the devices are banned in the workplace. The Chinese are attached to their iPhones and may continue to use them personally while using a work-issued Xiaomi or Huawei phone in the office. Certain analysts argue that slumping domestic demand is a greater problem as consumers cut back on luxury items. This has already been priced into Apple’s market value. Furthermore, Apple’s higher-margin services arm continues to prosper. It now represents 26% of its total revenue and the China impact on this segment is likely to be limited. 

But there is a more precarious issue at stake for Apple. The company has traditionally operated freely in China while its tech rivals like Google or Meta are heavily constrained, or outright banned. This represents a significant advantage in the world’s second largest economy. Investors will therefore ask whether the government’s move is part of a wider ‘shadow ban’. Will iPhone ownership be socially frowned upon? If so, these newly imposed restrictions could be the start of something bigger. This would have a more serious impact on Apple’s future prospects.

Investors watching potential knock-on effects on other China-exposed US stocks  

The latest rules show that the CCP will no longer recognise companies as international. There are Chinese entities and there are foreign entities. And foreign entities will pay the price of their country’s perceived transgressions. The US is in the firing line and investors will be closely watching the fortunes of other big American companies in China. General Motors and Boeing were picked by analysts on CNBC this morning as two highly China exposed stocks. 

Huawei as Chinese national champion

Huawei is also a major factor in the decision to go after Apple. US sanctions against the Chinese telecoms giant have been devastating. In mid-2020, Huawei was a growing titan in the smartphone industry, accounting for 29% of devices sold. That share had fallen to 7% just two years later. The company was crippled by trade restrictions that prevented chip companies from selling any of their most advanced products to Chinese customers. However, Huawei’s latest Mate 60 Pro model boasts 5G capabilities only thought possible with the Western chip making equipment China is barred from accessing. 

The latest smartphone demonstrates similar wireless speeds to Apple’s latest iPhones and numerous tests. Analysts are therefore speculating about a Chinese technology breakthrough. It has been suggested that the higher speeds were accomplished with advanced packaging and other steps that could lead to extra power consumption. Huawei may be absorbing the higher costs of this to demonstrate a national triumph to the country and wider world. 

Apple and China Speakers

At CWG speakers, we are always looking for speakers to predict which way this economic war is going next. Tim Cook is unlikely to speak publicly about his views on the situation as he works to sort out the situation behind the scenes. Instead CWG works with a wealth of business, political, and economic experts who can identify the big factors at play in this particular dispute. Get in touch for speaker ideas if you have clients concerned about what this means for their investments in China.