Apple shares experienced a decline of over 3% on Thursday, following a 4% decrease the previous day, due to reports suggesting that Chinese government workers may be banned from using Apple iPhones. Although these restrictions have not been publicly announced by the Chinese government, concerns arise regarding the potential entanglement of Apple's products in the ongoing tensions between the U.S. and China. Greater China, including Hong Kong and Taiwan, represents Apple's third-largest market, accounting for 18% of its $394 billion revenue in 2022. Additionally, the majority of Apple products are assembled in China. Apple declined to comment on the reported restrictions.
According to The Wall Street Journal, China has ordered officials at central government agencies not to bring iPhones into the office or use them for work. The extent of the bans remains unclear, but Bloomberg News reported that the ban may extend to state companies and government-backed agencies. While a ban on government employees could potentially reduce iPhone unit sales in China by up to 5%, the larger threat to Apple lies in the possibility that the bans may encourage everyday Chinese citizens to use electronics from Chinese companies, thereby promoting domestic technology.
In response to the potential government iPhone ban and increased competition from Huawei, Dan Niles, portfolio manager at Satori Fund, sold his stake in Apple and is now shorting the company. Last week, Chinese retailers began accepting orders for Huawei's new phone, the Mate 60 Pro, which quickly gained popularity on social media. The phone, priced at 6900 RMB (approximately $954), uses a chip manufactured by Huawei's subsidiary, HiSilicon, and is rumored to have access to 5G speeds.
Huawei faced sanctions in 2019 when it was placed on the U.S. entity list over concerns that its technology could provide the Chinese government with backdoor access to communications. These sanctions significantly impacted Huawei's phone business, leading to the spinoff of some of its phone brands and a $12 billion revenue shortfall in 2020. Huawei's new phone raises questions about the effectiveness of separate restrictions on chip manufacturing technology aimed at preventing Chinese companies from producing cutting-edge processors.
In Apple's most recent quarter, Greater China sales grew by 8% to $15.76 billion, making it the company's fastest-growing region. Apple CEO Tim Cook noted that the switch from Android phones to iPhones was a significant factor in Apple's positive results.