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On September 7, according to a Reuters report, concerns were raised among U.S. lawmakers over Beijing’s expanding restrictions on iPhone usage by government personnel. This development has further stoked fears within the American tech sector, particularly among companies heavily reliant on the Chinese market. Apple, a major player in this sector, experienced a significant decline in its stock price, closing down 2.9% on that Thursday. This decline marked the worst two-day percentage drop for the company since November. The trigger for this downward spiral was the revelation that Beijing had instructed employees at certain central government agencies to cease using Apple phones while at work.
This situation highlights the precarious nature of even a company like Apple, which has maintained a reasonably positive relationship with the Chinese government and possesses a substantial presence in the world’s second-largest economy. It demonstrates that no tech giant is immune to the growing tensions between the United States and China.
The ongoing friction between the U.S. and China has escalated in recent years. Washington has been actively working to limit China’s access to critical technologies, especially cutting-edge chip technology. In response, Beijing has been striving to reduce its dependence on American technology. A significant development in this context was the recent launch of Huawei’s Mate 60 Pro smartphone, powered by an advanced chip produced by Chinese contract chipmaker SMIC. This partnership seemingly marks a breakthrough for Huawei and SMIC, both of which have faced U.S. sanctions.
In response to these developments, the U.S. Commerce Department announced its efforts to gather more information regarding the nature and composition of the chip involved, potentially violating trade restrictions. The department emphasized its commitment to assess and adapt controls based on evolving threats to national security.
White House National Security Adviser Jake Sullivan indicated that the U.S. government is actively seeking more information about this Huawei chip. Sullivan stated that various methods would be employed to gain a comprehensive understanding of the situation, with the goal of making informed decisions without undue delay.
The U.S. sanctions have significantly impacted Huawei’s access to essential chipmaking tools required for producing advanced smartphone models. Consequently, Apple has managed to capture some market share from Huawei, a favorite in China.
Analysts at BofA Global Research see Huawei’s ability to supply and scale its domestically produced Kirin 9000S chips as an opportunity for the company to increase its shipments and regain market share.
Meanwhile, Apple supplier Qualcomm, which maintains a significant presence in China, saw a steep decline of 7.2% in its stock value, leading the losses among major tech companies.
Both major U.S. political parties have expressed concerns about the national security risks posed by Chinese products, pressuring the Biden administration to adopt a more assertive stance toward China. U.S. Representative Mike Gallagher, a Republican and chairman of the House panel on China, described the broader ban as consistent with the Chinese Communist Party’s strategy to promote domestic champions in telecommunications while gradually restricting Western companies’ access to the market.
U.S. Senator Mark Warner, a Democrat and chair of the Senate Intelligence Committee, echoed similar concerns, suggesting that as the Chinese economy faces challenges, it may resort to more aggressive actions against foreign businesses.
China has previously imposed restrictions on shipments from prominent U.S. firms like Boeing and memory chipmaker Micron, affecting various sectors of the American economy. Other suppliers of Apple, including Broadcom, Skyworks Solutions, and Texas Instruments, also experienced stock declines ranging from 1.8% to 7.4%. These developments had a noticeable impact on the three major U.S. stock indexes, particularly the tech-heavy Nasdaq Composite, which closed down by 0.9%.
In Asia, shares of several Apple suppliers also fell following this news, with companies like TSMC and Tokyo Electron experiencing declines of 0.7% and 4%, respectively.
This announcement appears to have refocused investors on the inherent risks in the U.S.-China relationship, especially within the technology sector, as noted by Rick Meckler, a partner at Cherry Lane Investments.
For Apple, China has been a significant bright spot in what has otherwise been a challenging period for iPhone sales. China not only serves as a crucial manufacturing hub but also contributes substantially to Apple’s revenue, accounting for nearly a fifth of its total earnings.
with competitors gradually closing the gap in high-end smartphone sales and the potential for further escalations in U.S.-China tensions, Apple’s dominance in the Chinese market could face greater challenges in the future. The upcoming launch event for the iPhone 15 lineup and new smartwatches may provide a boost in demand for Apple products, but the evolving geopolitical landscape poses significant uncertainties for the tech giant’s future in China.
