Apple: China bans government officials from using iPhones

Apple: China bans government officials from using iPhones

China is reportedly banning government officials’ use of iPhones for work, according to a report from the Wall Street Journal. Yahoo Finance Live analyzes Apple’s (AAPL) stock reaction to this news from one of the company’s biggest markets.

Video Transcript

AKIKO FUJITA: China reportedly banning government officials from using Apple’s iPhones and other foreign branded devices for work. “The Wall Street Journal” is reporting that officials were notified in recent weeks through chat groups and meetings and the ban, of course, comes just weeks before Apple is set to release its latest iPhone shares there.

Down nearly 4% today, Seana, you know, the stock move is an interesting one for me because, on the one hand, when you look at what has been reported by the Journal, on its surface, it’s tough to say how significant a hit that would actually be because we’re talking strictly government officials that would be banned. It’s sort of similar to what we have seen play out here in the US with TikTok. Government officials haven’t been allowed to use TikTok, but that hasn’t really affected the user numbers for the app. So that’s what it appears to be on the surface.

Now, I think the big concern here is that this is such a significant market for Apple. They get roughly 20% of their revenue from China. Is this just the beginning and a sign of things to come as we see the US and China and tensions intensifying?

SEANA SMITH: Yeah, exactly. And you’re exactly right there, Akiko. China just so important to Apple for its revenue here, given the fact that they get about a fifth of their sales from the country. But when you take into account what this could mean, some of those ripple effects across the other names within the tech sector, D.A. Davidson’s Tom Forte was highlighting some of that risk today.

And he was saying that the fact that Apple is not immune here, a company that employs hundreds of thousands of people within China really just shows that China is not afraid to potentially ban any sort of company, any sort of product that they could potentially see an issue with when it comes to security. And this is just the latest, like you said, that tit for tat back and forth between the US and the Chinese government officials there.

We have certainly started to see maybe hints of some improvements, some increased dialogue between officials, but then you get news like we potentially have today, this Wall Street Journal report, saying that there is a long way to go and many US companies, at least here in terms of potential China bans, could have some challenges here in the coming months.

AKIKO FUJITA: Yeah, there have been conversations happening between the US and China. But at the end of the day, the concerns around national security specifically, data collection, not expected to really thaw here. And that appears to be the concern. I mean, you could argue, on the one hand, this is a tit for tat what the US has done to companies like Huawei, as well as TikTok, China is trying to do to Apple. That’s one theory.

Now, at the same time, if you think about what the concern is on terms of national security, it’s been the same on the US side as well as the Chinese side, which is data collection. Also, you could argue China looking at some of those sagging sales for their homegrown names like a Huawei. If you banned on some level Apple products, you know, that could potentially give a lift to Chinese companies as well.

But one more number to leave you with on this story at least, Seana, Bank of America saying that if there were such a ban to be enforced, they’re looking at a headwind for Apple anywhere from 5 to 10 million units. So tough to still gauge what the impact is likely to be, but there are concerns this is the first step in what could be a chilling effect in China.

SEANA SMITH: Yeah. And also remember that this is potentially coming ahead of the highly anticipated new iPhone that we’re expecting next week. And we know Apple has a lot riding on this potential new model here, given the fact that we’ve seen a couple of quarters of declining iPhone sales.

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