08 September 2023
If you are covering the news that shares in Apple have fallen for a second day in a row after reports that Chinese government workers have been banned from using iPhones, please see comment below from Ben Barringer, equity research analyst at Quilter Cheviot:
“The recent move by the Chinese government to restrict the use of non-Chinese smartphones in government buildings and by government employees is seen by many as a retaliation to the US restrictions on China's tech capabilities. This decision primarily impacts Apple, and there's speculation that the restriction might extend to employees of state-owned businesses.
“To put this into perspective, China accounts for approximately 20% of Apple's revenues. Government employees represent less than 5% of China's population, which translates to a potential 1% decrease in Apple's revenue. If the restrictions spread to state-owned enterprises, Apple could face up to a 5% revenue impact.
“Additionally, investors are reflecting on the Huawei situation. The Trump administration had previously restricted Huawei, which led to the company's struggles in building a competitive smartphone. However, Huawei has now released a new phone, the MATE P60, using Chinese-based silicon. While it's a decent product, it doesn't quite match the iPhone's standards but gives the Chinese a quality alternative. Over the past five years, Apple has capitalised on Huawei's absence, capturing a significant market share in China. It's worth noting that the Chinese government typically refrains from imposing bans unless they have a domestic alternative. Now that they have a homegrown smartphone option, it accentuates the concerns surrounding these restrictions.
“The resurgence of Huawei raises the question: will Apple's market share in China decline as Huawei regains its footing? This also comes at a sensitive time for Apple with the release of their iPhone 15 just days away.”
