Reports of China iPhone ban sends Apple shares spiralling low, very low

Apple's shares took a tumble on Thursday, September 7, after reports emerged of China banning iPhones for government employees. According to reports, Apple, the world's most valuable company, is on track to lose nearly $200 billion in market value, with shares falling by 6% in two days.

Is China banning iPhones?

• China, where most iPhones are assembled, is now reportedly banning the use of iPhones for certain groups. The reason behind this move remains unclear.
• Tense relations between the US and China are beginning to impact large businesses, even one as massive and seemingly invincible as Apple. 

• The Wall Street Journal reported that Chinese central government officials have been asking employees not to bring iPhones into work or use them at work.
• However, there has been no official ban announced by the Chinese government so far. CNN reported, citing an anonymous source close to the Chinese central government agencies, that officials have been "unofficially" avoiding using iPhones since before the pandemic started, without the presence of any formal policy.
• On the other hand, some people say the report on the so-called 'ban' has been overblown.

On the recent China news over the last few days 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. iPhone 15 on deck 🍎📱

— Dan Ives (@DivesTech) September 7, 2023

What does this mean? 

• A ban would be detrimental to Apple since China is its third-largest market and also where it assembles most iPhones.
• If China were to impose a blanket ban on government employees from using iPhones, it would reduce sales by 5% in China.
• But the larger problem isn't just about government employees not using iPhones; this might influence their families, friends, and other consumers to avoid using iPhones as well.

In China, people are not lining up for the new iPhone but for the new Huawei Mate 60. For a long time now, Chinese people have been getting the best phones first. pic.twitter.com/8AmdwtCie5

— Johannes Maria (@luo_yuehan) August 30, 2023

• When Apple's CEO Tim Cook made a high-profile visit to China in March 2023, it underscored the importance of the country and the region in terms of both sales and manufacturing for the world's most valuable company. 
• It is also a message that if a company like Apple can be affected by rocky relations between China and the US, other foreign or American companies can also face the same issues. 
• However, China's sometimes cold response to American companies isn't new. In the past, Chinese ministries had banned Tesla from their premises citing security reasons. 
• Moreover, the US has also taken similar actions against Chinese companies, most notably, Huawei citing national security concerns. 
• The US has barred Huawei from accessing sensitive technology that can give China a backdoor into its communication technology. The sanctions hampered Huawei's business. 
• In some US government offices, Chinese-owned social media platform TikTok is banned. 

Tim Cook's biggest nightmare.

There are more governmental employees in China than you think. This is what happens when all of them have to switch from iPhone to another brand like Huawei overnight. The CCP has almost 97 million members who can no longer legally own an iPhone. https://t.co/brzsCvvsH5

— Vadim Yuryev (@VadimYuryev) September 8, 2023

Apple also faces serious competition from Chinese brands such as Huawei that want to claw back the market share occupied by the American giant. 

The latest phone release by Huawei equipped with an advanced chip made locally has caused quite a stir both internationally and domestically. US sanctions were supposed to prevent China from making cutting-edge processors. 

This development comes ahead of the iPhone 15 launch in China.