Apple shares decline after Chinese government restricts iPhones

Apple iPhone 15 pro AM AH3

China has always maintained strict control over the technology used by its citizens and government officials. However, the Chinese Communist Party’s (CCP) recent decision to restrict the use of iPhones by government employees has sent shockwaves through Wall Street as Apple experienced a 2.9% drop in its stock price, marking its most significant two-day percentage decline since November.

Why did China ban iPhones for official use?

Despite Apple’s positive relationship with the CCP, the government has instructed employees at central government agencies to stop using iPhones during working hours due to privacy concerns. However, experts argue that this ban is a direct result of the US’s measures to restrict China’s access to critical technologies.

While the extent of this ban remains unclear since there is no official word from the CCP, this move could significantly affect Apple’s sales, given that China is its third-largest market, contributing 18% of the company’s total revenue.

“Perhaps more importantly, restricted use of iPhones among government employees could negatively impact sales among consumers (related family members; general populace) and could be part of a broader move by the Chinese government to promote usage of domestic technology,” said Bernstein analyst Toni Sacconaghi.

US government’s response

In response to these developments, the US Commerce Department has expressed concerns and announced its intention to gather more information about the matter. Additionally, US Representative Mike Gallagher, chairman of the House panel on China, characterized China’s actions as typical of the Chinese Communist Party’s strategy, which involves promoting national champions in telecommunications while gradually restricting market access for Western companies.

Moreover, Senator Mark Warner, chair of the Senate Intelligence Committee, stated, “As the Chinese economy stalls, we can potentially anticipate more aggressive moves against foreign businesses.”

Huawei getting back into the mix

While the US government’s ban on Huawei conducting business with other American countries has significantly hampered the company’s operations, the CCP’s decision to restrict iPhone access aligns with the launch of Huawei’s new phone, the Mate 60 Pro. Additionally, the fact that the phone’s Kirin 9000 chip can access 5G services could provide Huawei with an opportunity to regain some market share.