Amidst escalating tensions between the United States and China, concerns over Apple and its global tech suppliers have deepened as China expands its restrictions on iPhone usage among government employees. These developments have sparked a sell-off in the global tech stock market and raised apprehensions about the impact on Apple and its suppliers, particularly considering the growing competition from Huawei, a Chinese tech giant.
Over the past two days, Apple’s shares plummeted by 6.4%, resulting in a staggering $190 billion reduction in its market capitalization. This significant decline followed reports that Beijing had recently instructed certain central government employees to cease using iPhones for work-related purposes. This move adds considerable pressure on Apple in one of its most significant markets.
Simultaneously, Huawei, despite facing previous challenges due to U.S. sanctions, launched two new smartphones – the Mate X5, a foldable device, and the Mate 60 Pro+, which garnered global attention for its resilience against U.S. restrictions. This launch further intensified the competition between Apple and Huawei.
The repercussions of these developments extended to Apple’s suppliers, notably in Taiwan. Largan Precision, a company specializing in camera lens production for Apple, saw its stock price drop by more than 4%. Similarly, Taiwan Semiconductor Manufacturing Company (TSMC), a leading contract chipmaker for Apple, experienced a 0.6% decline in its stock value.
In mainland China, Luxshare Precision Industry, known for manufacturing connector cables for the iPhone, MacBook, and AirPods, and possessing factories capable of producing iPhones, faced a 2% decline in its shares. This was not the first time Luxshare’s stock had been affected by Huawei’s product launches.
Analysts speculate that Huawei’s recent moves might be the initial steps in its comeback strategy to compete with Apple more aggressively. They suggest that Huawei’s meticulous planning and product releases were designed to manage the expectations of its target consumer base before Apple’s press conference.
China has traditionally been a strong market for Apple, especially when compared to the challenges it has encountered in global iPhone sales. This situation stems from the U.S. government’s restrictions on tech exports to Huawei in 2019, which severely impacted Huawei’s smartphone business.
However, Huawei’s recent successes stand in stark contrast to the struggles faced by Apple suppliers. Semiconductor Manufacturing International Corp (SMIC), believed to have manufactured the advanced chip in Huawei’s new smartphone, saw its stock rise by 1%. China’s semiconductor sector also experienced a 1% increase.
While the extent of China’s iPhone restrictions remains unclear, reports indicate that these measures may extend to visitors as well. Employees at affected state-owned enterprises (SOEs) in Beijing were informed of the ban in recent weeks, with some SOEs even offering subsidies of 100 to 200 yuan ($13 to $26) to encourage their employees to switch to local smartphone brands. However, not all SOE employees reported being subject to these restrictions.
The potential consequences of these restrictions on iPhone sales in China are significant. Bank of America estimated that such a ban could result in a decline of iPhone sales by 5 million to 10 million units annually from China’s total annual sales of up to 50 million units.
In contrast, Huawei’s smartphone sales, driven by the new Mate 60 Pro, could surge by 65% this year to reach 38 million units. However, analysts acknowledge that some “non-commercial risks” could still affect Huawei’s growth.
Huawei’s competition may not only impact Apple but also have a ripple effect on domestic Chinese smartphone brands like Honor, which had previously benefited from Huawei’s difficulties.
Several Wall Street analysts argue that these restrictions underscore the challenges faced by even large tech companies with strong government ties and a significant presence in the Chinese market. The deteriorating relations between the U.S. and China have exacerbated these tensions, with the U.S. seeking to limit China’s access to critical technologies, particularly advanced chip technology.
The U.S. Commerce Department’s scrutiny of Huawei’s new chip for potential trade violations highlights the ongoing disputes between the two nations. The department emphasized the need to protect U.S. national security interests in light of the evolving threat landscape.
A teardown analysis conducted by research firm TechInsights revealed a higher proportion of China-made chip components in the Mate 60 Pro compared to previous models, indicating Beijing’s progress in the semiconductor industry.
the widening curbs on iPhone usage by Chinese government employees and the escalating competition from Huawei have cast a shadow over Apple and its suppliers. These developments come against the backdrop of strained Sino-U.S. relations and the ongoing technological rivalry between the two superpowers.