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Apple slides on reports of China widening iPhone curbs

September 8, 2023

Apple shares have fallen sharply following reports of significant Chinese restrictions on iPhones at government offices and state-backed entities. Could a new, Chinese-made microchip be one reason for China's ban?

Customers line up at an Apple Store to pick up their orders of the new iPhone 14 on September 16, 2022 in Wuhan.
China, one of Apple's biggest markets, has banned iPhones for government workersImage: Getty Images

Apple has lost around $200 billion (€186.9 billion) in market capitalization over just a few days as tensions between the US and China rise, with media outlets reporting this week that the iPhone maker is being singled out by Beijing.

The ban was first reported by the US business daily Wall Street Journal, which cited
unnamed sources saying China is ordering officials at central government agencies not to use iPhones or other foreign branded phones. Britain's Financial Times cited six unnamed sources at government institutions and state-owned companies, including a nuclear technology company and a hospital, saying they've been told to stop using Apple phones.

The move expands on a rule implemented by some government agencies in 2020. State-owned Chinese financial publication Economic Observer said the initial ban was due to Apple's strict privacy rules, which made it difficult for anti-corruption officials to access and investigate suspects' phones, Reuters reports.

A Chinese woman reacts while setting up the facial recognition feature on her iPhone X inside an Apple showroom in Beijing on November 3, 2017
China's iPhone ban for state workers follows the latest round of US sanctions targeting the Chinese tech sectorImage: FRED DUFOUR/AFP/Getty Images

Ban hits Apple stock

Following the news, Apple stock performance experienced sharp declines for two consecutive trading sessions on Wednesday and Thursday, falling by 3.6% and 2.8% respectively. 

China is a significant market for the US tech giant. The Asian country accounted for nearly 20% of Apple's total revenue in the last quarter. While sales fell elsewhere, business in China grew during this period, Apple executives had pointed out.

The news also spurred a sell-off in chip stocks, a key component of mobile phone technology.

On Friday, Japanese news outlet Nikkei Asia reported that China is expanding the restrictions to local governments and state-owned companies as well.

Customers look at the new iPhone14 at an Apple store on September 16,2022 in Wuhan.
Between April and June this year, nearly 20% of Apple's revenue came from China Image: Getty Images

US launches probe into new Chinese chip

The news of the ban in the centrally-planned economy follows a release last week of a Huawei smartphone employing a made-in-China processor, according to a report by Bloomberg.

The release by the domestic telecommunications company was hailed as a success in China, which has struggled to develop its tech sector amid heavy sanctions from the US. In August, US President Joe Biden approved the latest round of restrictions meant to limit the technological capabilities of its biggest geopolitical rival. This included US investments in sensitive technologies like advanced computing chips and microelectronics.

The US government has since launched a probe into the Chinese-made chip, found in the Huawei Mate 60 Pro mobile phone. Its release has raised questions about how effective US sanctions have been. Like Huawei, the Chinese company Semiconductor Manufacturing International Corp., which produced the chip, had also been sanctioned by the US and restricted from accessing US technology.

China: Economic friend or foe?

US-China business relations under pressure

The Chinese iPhone ban has raised alarm about the state of business relations between China and the US. Despite rising geopolitical tensions, Apple had thus far maintained a positive relationship with China. Apple and its suppliers employ thousands of workers in China.

Analysts are concerned this development could mean worse is in store for other US companies operating in China.

"The worry for the market is that, if China purposely chooses to make business difficult for a company like Apple, which has a good and important working relationship in China, then it can do so for a lot of other US companies doing business in China," Briefing.com analyst Patrick O'Hare told Reuters.

But others have said the ban for government employees will have a negligible effect on Apple. A Chinese government ban would affect less than 500,000 iPhones of roughly 45 million projected to be sold in the country in the next year, according to an analysis by investment bank Wedbush Securities.

"We believe China news is way overblown," Wedbush analyst Dan Ives wrote on Twitter. 

In recent years, China has put a growing emphasis on using locally made products.

In a press briefing on Friday, Chinese Foreign Minister Mao Ning said that China welcomes the products and services of any country, as long as they comply with China's laws and regulations.

Edited by: Uwe Hessler

Kristie Pladson
Kristie Pladson Business reporter, editor and moderator with a focus on technology and German economy.@bizzyjourno