Beijing’s recent restrictions on government staff’s use of iPhones have caused concern for Apple and other US technology stocks. The financial impact of escalating tensions between the US and China on companies heavily invested in China is worrying investors. Apple experienced a 2.9% drop, its worst decline in two days since November, following reports that Beijing has instructed employees at certain government agencies to stop using their Apple mobiles at work. Analysts on Wall Street believe these restrictions demonstrate that even a company with a strong relationship with the Chinese government and a significant presence in the country is not immune to rising tensions. Apple supplier Qualcomm, which has a large presence in China, saw a 7.2% decrease in stock prices, leading losses among major tech companies. US Representative Mike Gallagher, Chairman of the House panel on China, stated that the broader ban is not surprising and reflects efforts to limit China’s market access for Western companies. The friction between the US and China has intensified in recent months as the US seeks to restrict China’s access to crucial technologies, including cutting-edge chips, while China aims to reduce its reliance on American tech. Shipments from notable US firms such as Boeing and Micron have already been curbed by China. Rick Meckler, a partner at Cherry Lane Investments, believes that the announcement has refocused investors’ attention on the risks posed by the US-China relationship, particularly in the technology sector. This led to a decline in the three main stock indices, with the Nasdaq Composite, in particular, being affected. Other suppliers of Apple, including Broadcom, Skyworks Solutions, and Texas Instruments, also experienced lower stock prices, falling between 2% and 7.3%. Despite facing difficulties in iPhone sales, China remains a crucial market for Apple, accounting for nearly a fifth of its revenue. Susannah Streeter, Head of Money and Markets at Hargreaves Lansdown, points out that China is not only essential to Apple as a manufacturing hub but also as an increasingly important source of revenue. Streeter highlights that rivals are narrowing the gap in high-end smartphone sales, and an escalation of tensions could provide them with a greater opportunity to take market share from Apple. Additionally, Huawei’s launch of the Mate 60 Pro smartphone, powered by an advanced chip from Chinese company SMIC, poses a challenge to Apple. The US sanctions on Huawei have affected its access to chipmaking tools, allowing Apple to gain some market share in China. BofA Global Research analysts believe that if Huawei can supply its home-grown Kirin 9000S chips, the Mate series phone could help the company increase shipments and regain market share. However, Apple may experience a demand boost after its upcoming event next week, where it is expected to unveil the iPhone 15 line-up and new smartwatches.
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