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Apple has been drawn squarely into the power struggle between China and the US. Chinese government employees should no longer use iPhones, the company loses 200 billion in market value. What could the consequences be?
Conspicuous advertising for the iPhone has so far also been seen in China’s capital Beijing. “Take care of the security of your personal data,” read an oversized billboard in the city in the spring, with which Apple advertised its flagship product. The US company also has an Apple Store in the city.
Could that change now? As several media, such as the “Wall Street Journal”, unanimously report, Chinese authorities, institutions and state-owned companies have prohibited their employees from using the iPhone professionally.
According to the “Financial Times”, employees of a wide range of state-owned companies – from nuclear power plants to hospitals – have been informed in recent weeks that they are no longer allowed to bring the smartphone from the Californian manufacturer to the workplace. Such regulations are said to have already existed in some ministries.
Second largest market after the USA
The reports sent Apple shareholders into an uproar. The group’s shares lost around seven percent within two days. At times, around 200 billion dollars in market value were destroyed.
The consequences for Apple could be drastic. “A ban on all government employees could reduce iPhone sales in China by up to five percent,” commented Toni Sacconaghi, technology analyst at Bernstein. The greater threat to Apple, however, is that the bans also signal to citizens as a whole that they should now use smartphones from Chinese companies instead.
The Apple Store in Beijing.
After the USA, China is Apple’s second most important market – and the iPhone remains the company’s most important product. The US company achieved global sales of $39.7 billion in the third quarter. China accounted for $15.8 billion of this.
Apple boss Tim Cook recently reported a double-digit increase in sales in China – in a shrinking smartphone market there. Never before have so many users switched to the iPhone as in the past quarter.
Escalating dispute over technology
Now the company appears to be caught up in the power and technology dispute between China and the United States. According to reports, the Chinese government in Beijing had already instructed its central administration in 2022 to switch IT equipment from foreign manufacturers to computers “Made in China”.
The United States, for its part, imposed export controls late last year to limit China’s ability to buy and produce high-end computer chips that could be used in military applications.
Out of concern about espionage for the government in Beijing, US authorities also banned Chinese apps from company cell phones and Chinese products from critical technical systems. The video platform TikTok and the telecommunications supplier Huawei were affected.
Apple wants to become more independent from China
Meanwhile, Apple has been trying for some time to become less dependent on China as a production location. The delivery bottlenecks during the pandemic in particular put a strain on the company and showed how dependent it is on the People’s Republic. Apple is now shifting more and more iPhone production to India.
In the spring, the broadcaster Bloomberg TV reported that Apple had tripled its iPhone production in India last year and produced smartphones there worth 6.35 billion euros. The first Apple Store in India opened in Mumbai in April, followed a few days later by a store in New Delhi.
Apple’s iMac computers and MacBook laptops are also increasingly being built elsewhere. Production is now increasingly taking place in Thailand and Vietnam.
“Technology War will probably escalate”
China’s technology companies are also trying to catch up technologically with their competitors from the USA when it comes to products for end customers. The cell phone manufacturer Huawei has just presented its new smartphone Mate 60 Pro. It supposedly works with a powerful 5G chip. However, the USA had sanctioned these chips and technologies that make the production of powerful chips possible.
Market observers such as analysts at Jefferies bank assume that “the technology war between the USA and China is now likely to escalate”. This could also further increase the geopolitical tensions between the two countries. And how are Chinese smartphone buyers reacting? Next week, on September 12th, Apple is expected to unveil its new iPhone 15.