China’s widening curbs on government staff using iPhones intensified a sell-off in global tech stocks on Friday on fears that Apple and its suppliers could take a hit from rising China-US tensions and growing competition from Huawei.
Apple shares have tumbled 6.4% over the past two days, wiping $190bn (about R3.6-trillion) from its market capitalisation, after news that Beijing had recently ordered some central government employees to stop using iPhones at work.
Several Wall Street analysts on Friday said the sell-off was overdone and that any impact on Apple’s revenue was likely to be small due to the smartphone’s popularity in China. The company stabilised in early trading on Friday, rising 0.9%.
Apple is facing increased competition from China’s Huawei, which launched two smartphones — the foldable Mate X5 and the Mate 60 Pro+ — that drew global attention for showcasing its resilience to US sanctions.
Some analysts believe Huawei’s moves could be a first step in comeback efforts by China’s “national champion” to rival Apple after it took some market share when US sanctions rolled out four years ago. Apple is set to introduce a new iPhone on September 12 after a weak quarter for sales of its flagship product.
“We believe Huawei’s activity this time was well prepared and not sudden,” said Ivan Lam, an analyst at Counterpoint, whose outlook for the new products exceeds previous estimates. “It can manage the psychological expectations of the target consumer group before Apple’s press conference.”
China has been a bright spot for Apple, its third-largest market after the Americas and Europe, in an otherwise tough period for iPhone sales. Huawei’s smartphone business was hit hard after the US curbed tech exports to it in 2019.
Apple’s sales in China this year have been helped by rare deals launched by its third-party retailers in February that offered discounts on its iPhone 14 Pro by as much as 10%. However, analysts said that those discounts could end up undermining sales of Apple’s new products set to launch in coming days.
It was not immediately clear how wide China’s iPhone curbs are, but one employee at an affected state-owned enterprise in the capital said they extended to visitors.
“Anyone, including business visitors, who enters our work area cannot bring in their iPhones,” said the source, one of two employees who said they were told of the ban in recent weeks.
The source, who spoke on condition of anonymity, said the company was giving employees a subsidy of 100-200 yuan (about R260-R520) to switch to local brands. But some staff at other state firms said they hadn’t been banned from using iPhones.
While the number of central government employees is not public, Bank of America estimated that such a ban could cut iPhone sales by 5-million to 10-million units a year from China’s annual total of as much as 50-million.
By contrast, Huawei’s smartphone sales, driven by the new Mate 60 Pro, could jump 65% this year to 38-million units in the absence of some “noncommercial risks”, said Ming-Chi Kuo, an analyst at TF International Securities.
However, Canalys analyst Nicole Peng said Huawei could present a greater threat to domestic peers, such as Honor, that have benefited from Huawei’s woes.
Several Wall Street analysts said the curbs showed that even a company with a large presence in China and good ties to the government is not immune to rising tension between the two nations. Apple has shifted some production out of China in the aftermath of the country’s strict Covid restrictions.
“The only way Apple could draw the ire of Beijing is moving supply chains out of China at a pace or to a degree that Beijing feels uncomfortable with,” Evercore ISI strategist Neo Wang said in a note.
“If that is the case, it shouldn’t be a surprise for Beijing to punish Apple by playing the ‘security’ card excessively. It is unclear whether what we are seeing now is part of this,” Wang said.
Washington is trying to limit China’s access to key advances, including the latest chip technology, and Beijing wants to cut reliance on US tech.
Analysis by research firm TechInsights shows more China-made chip components in the Mate 60 Pro than previous models, a sign of Beijing’s progress.
The US commerce department is seeking more information on the “character and composition” of the new Huawei chip that may violate trade curbs, it said on Thursday.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.