Apple shares fell after news that China banned government employees from using iPhones

Apple shares fell about 3% on Thursday, after falling 4% on Wednesday, after some reports suggested Chinese government employees could be banned from using iPhones.

The reported restrictions, which have not been publicly announced by the Chinese government, raise concerns that Apple products could get caught up in international tensions between the US and China.

Mainland China, which includes Hong Kong and Taiwan, is Apple’s third-largest market, accounting for 18% of total revenue of $394 billion. This is also where the majority of Apple products are assembled. The tech giant declined to comment.

China has ordered officials at central government agencies not to bring iPhones into the office or use them for work, the Wall Street Journal reported on Wednesday. It’s unclear how widespread the ban is. The ban could spread to other state-owned companies and government-backed agencies, Bloomberg News reported on Thursday.

Bernstein analyst Toni Sacconaghi wrote in a note on Thursday that while a ban on all government employees could reduce iPhone sales in China by as much as 5%, it would pose a major threat. more for Apple if the ban sends a signal that everyday people should replace it. Use electronic devices manufactured by Chinese companies.

“Perhaps more importantly, restricting iPhone use to government employees could negatively impact sales to consumers (involved family members; citizens),” Sacconaghi wrote. in general) and may be part of a broader move by the Chinese government to promote the use of domestic technology.”

Dan Niles, a portfolio manager at Satori Fund, said on Thursday that he sold his shares in Apple and is now shorting the company, citing a possible government iPhone ban. and increased competition from Huawei.

Last week, several Chinese retailers began accepting orders for the new Huawei phone, Mate 60 Pro, which quickly became a hot topic on social networks in the country.

The phone starts at 6,900 RMB, or about $954, and uses a Chinese-made chip from Huawei’s chip company, HiSilicon. Initial tests suggest the phone can access 5G speeds, although Huawei’s specs pages make no mention of that capability.

Huawei was placed on the US entity list in 2019 over concerns that its technology could give the Chinese government backdoor access to communications. This move requires US companies such as Google and Qualcomm to seek permission from the US government before supplying Huawei. The sanctions have significantly hampered Huawei’s phone business, which was growing before the sanctions, forcing it in recent years to divest some of its phone brands and contribute causing a shortfall of USD 12 billion in 2020.

Huawei’s new phone has a chip made in mainland China, using a 7-nanometer manufacturing process. Smaller manufacturing processes tend to translate to faster and more efficient chips. This year’s upcoming iPhone is expected to use a 3nm process produced by Taiwan Semiconductor Manufacturing Company, and Apple is using a 7nm process for the first time to produce the A12 chip, which is used in the iPhone. new in 2018.

But Huawei’s chip raises questions about how well separate restrictions on chipmaking technology that prevent Chinese companies from making advanced processors are working.

“In my view, what it tells us is that the United States should continue to implement ‘small yard, high fence’ technology restrictions that are narrowly focused on national security concerns, not not on the broader question of trade decoupling,” Jake said. Sullivan, US national security adviser, said Tuesday in a briefing.

In Apple’s most recent quarter, which ended in June, sales in mainland China rose 8% year-over-year to $15.76 billion. It’s Apple’s fastest growing area. During the company’s earnings call, CEO Tim Cook said Apple is seeing users switch from Android phones to iPhones, saying that was “at the heart” of the results.

“We continue to try to convince more and more people to convert because of the experience and the ecosystem we can provide them,” Cook said.