China has banned the use of Apple’s iPhones at government-backed companies and agencies, according to reports that began to surface on Wednesday. Apple’s shares plummeted in the next couple of days, causing the tech giant to lose $200 billion.
China already had restrictions on iPhone use, which have been extended as per new orders, the reports suggest. It isn’t clear how widely China implemented the new restrictions, nor is the exact reason behind the ban.
What Does the Ban Mean for Apple?
With Chinese sales accounting for 18% of Apple’s total revenue in the previous year, China is the largest foreign market for the tech giant. Though Apple doesn’t reveal iPhone sales by country, an analysis by research firm Tech Insights shows China recorded more iPhone sales than the US in the second quarter of 2023.
Hence, it’s no surprise that Apple has been incurring heavy losses after the reports of the Chinese ban on iPhones surfaced.
As of now, Apple’s stock is the worst performer as per the Dow Jones Industrial Average.
The losses, however, aren’t confined to the direct drop in sales. As evident from the plummeting shares, the ban has led investors to doubt Apple over its ability to conduct business with the world’s second-largest economy.
The company’s share fell by 4% on Wednesday after the reports surfaced, followed by another 2.9% decline on Thursday.
With China banning government employees from bringing iPhones to work, Apple is likely to be at a disadvantage against its competition, notably Chinese smartphone behemoth Huawei. The ban also comes just a week ahead of the supposed launch of a new line of iPhones by Apple.
A Security Measure or a Push for Domestic Technology?
China is yet to make any public announcement about the new restrictions, which means we can only speculate about the potential reasons behind the ban.
The 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.Toni Sacconaghi, Bernstein analyst
He added that a ban on all government employees from using iPhones could potentially cause iPhone sales in China to drop by 5%.
While this could be a plausible reason, China may have also extended the restrictions simply with the goal of keeping government data secure. Intelligence agencies around the world have restrictions on the use of smartphones at sensitive spots due to the risk posed by potential spyware attacks.
However, China’s ban on the use of iPhones at government offices could potentially be an indication of a backdoor or vulnerability that causes Beijing to deem the devices unsafe.
Sino-US tensions have been quite high in recent times, with Washington trying to prevent China from accessing crucial equipment needed to stay competitive in the chip industry.
The bans on Huawei and TikTok, which is owned by Chinese company Bytedance in the US, aren’t very different from China’s ban on iPhones either.
It’s unclear if China implemented the new restrictions deliberately to hurt Apple. However, considering the fact that Huawei launched its first premium smartphones last week and Apple plans to roll out the new iPhones soon, the timing is definitely interesting.