Apple stock prices experienced a two-day consecutive decline, with a 3% drop on Thursday. This decrease was attributed to reports suggesting that iPhones may be banned from use by Chinese government workers. In a surprising turn of events, this follows a 4% loss in share prices on Wednesday, potentially wiping out $200 billion of market value. The closing of Thursday’s markets saw Apple stock trading at $177.55, marking a 2.92% reduction in value for the second consecutive day. However, the stock showed a slight improvement during after-hours trading, reaching $178.10.
The initial drop in stock price took place when The Wall Street Journal reported the Chinese government’s directive for government agencies to refrain from using iPhones and other foreign-made devices in their work. Bloomberg later reported that the iPhone ban is expected to extend to state companies in addition to government agencies. This development is of concern to Apple as China, Hong Kong, and Taiwan account for 18% of the company’s projected revenue of $394 billion in 2022. Moreover, the majority of Apple’s products are manufactured in China. This news is in stark contrast to Apple CEO Tim Cook’s previous acknowledgment of the mutually beneficial relationship with China, which he highlighted during a visit to the country in March.
Bernstein analyst Toni Sacconaghi expressed concern regarding the potential impact of an iPhone ban on Chinese government employees. Sacconaghi stated that such a ban could lead to a reduction in Apple’s phone sales in China by up to 5%. Additionally, this move could have broader implications, negatively affecting sales among consumers and potentially serving as a part of the Chinese government’s strategy to promote domestic technology usage.
Apple also faces increased competition in the Chinese phone market from Huawei, as U.S. sanctions drastically impacted Huawei’s sales in most markets in 2021. Huawei has recently released the new Mate 60 Pro phone, posing new competition for Apple in China.
However, there are differing opinions regarding the true impact of the Chinese government’s ban on iPhones. Wall Street tech analyst Dan Ives believes the impact has been blown out of proportion and stated, “…we believe in a worst-case scenario any China government agency iPhone ban is way overblown as to quantify its less than ~500k iPhones of roughly 45 million we expect to be sold in China over the next year.” Ives remains optimistic about the future, hinting at the highly anticipated release of the iPhone 15.
In summary, Apple’s stock prices have faced significant declines due to reports of a potential iPhone ban for Chinese government workers. However, the actual impact of this ban remains uncertain, with some experts downplaying its significance. Apple must now navigate the challenges posed by this news, along with increased competition from Huawei in the Chinese market.
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