Apple Shares Fall as China Extends Ban on iPhones to Government Agencies and State-backed Companies
In a significant blow to Apple, shares of the tech giant dropped by 2.9% on Thursday amid reports that China plans to expand its ban on the use of iPhones to government-backed agencies and companies. This comes as a major concern for investors regarding Apple’s ability to conduct business in the world‘s second-largest economy.
On Wednesday, Apple experienced its largest daily drop in over a month, resulting in a staggering loss of approximately $200 billion in just two days. This decline has positioned Apple’s stock as the worst performer on the Dow Jones Industrial Average.
The ban extension raises red flags for Apple, as it heavily relies on China as its largest overseas market. Chinese sales accounted for around 20% of the company’s total revenue last year. While Apple does not disclose iPhone sales data by country, research firm TechInsights estimates that there were more iPhone sales in China than in the United States last quarter. Additionally, the majority of iPhones are manufactured in Chinese factories.
Apple’s significance in Beijing’s economy cannot be overlooked. Analyst Brandon Nispel from KeyBanc Capital emphasized that the company has historically been considered relatively safe in China despite government restrictions. However, these reported bans on Apple products now prompt the question: is the Chinese government changing its stance?
According to The Wall Street Journal, China has already banned central government officials from using iPhones, with notifications sent through chat groups or meetings. Bloomberg later revealed that these bans were extended to state-backed companies, including energy giant PetroChina, which controls a substantial portion of the Chinese economy and employs millions of workers.
The timing of these bans is intriguing, occurring alongside the launch of a new high-end flagship smartphone by Chinese manufacturer Huawei. Bank of America analysts view this coincidence as “interesting.” The US government announced an investigation into Huawei’s new smartphone, citing concerns about possible circumvention of US restrictions on semiconductor exports.
The negative impact was not exclusive to Apple, as other tech companies also suffered following the news. The Nasdaq Composite dropped by approximately 0.9%, while the semiconductor sector experienced a decline of more than 2%.
CNN reached out to both Apple and China’s Ministry of Foreign Affairs for comment but did not receive a response at the time of publication. The ban extension on iPhones could potentially have significant consequences for Apple’s operations in China and its future performance.