China is expanding its ban on iPhones and other Apple products beyond central government employees to include local governments and state-owned companies, a move that could have significant repercussions for Apple’s market share and financial performance.
This expansion of restrictions is part of China’s broader effort to reduce its dependence on foreign technology. Since 2020, central ministries and agencies in China have restricted the use of foreign-brand products for official business.
However, as of August this year, these restrictions now extend to employees of local governments, including prefectures and cities, as well as state-owned enterprises, as reported by Nikkei.
The concerns about the impact on Apple’s sales in the Chinese market have already manifested themselves. The company’s market capitalization plummeted by approximately $190 billion in just two days, reflecting investors’ apprehensions about the widening ban.
According to a report, an employee at a state-owned company in Beijing disclosed that she received a confidential notice in early September regarding the expanded ban. The notice specified that the ban would come into effect for company departments dealing with trade secrets starting from October 1, affecting all employees from March 1 next year.
The ban doesn’t solely target iPhones; it also encompasses other Apple products such as the Apple Watch and AirPod wireless earphones, which are now prohibited in the workplace.
China to nurture its domestic tech giants
China has gradually been narrowing its procurement of information technology equipment to Chinese companies, compiling a list of recommended companies and products in the process.
Consequently, the PCs used in the central government’s ministries and agencies have been replaced by “Great Wall” PCs produced by state-owned enterprises. This trend is now extending to smartphones, with many government officials juggling two phones—one Huawei for work and an iPhone for personal use.
The potential impact of the expanded ban is significant. China boasts a large number of central and local government officials and state-owned enterprise employees, totalling 56.33 million as of 2021, according to China’s National Bureau of Statistics.
Although many government employees already own two iPhones alongside Chinese-branded products, if the ban expands to private companies and individuals, it will inevitably have a profound impact on Apple’s sales.
China stands as one of Apple’s most critical markets, accounting for approximately 20% of total sales in the April-June period of this year. Additionally, the majority of iPhones are assembled in Chinese factories.
China’s decision to ban iPhones aligns with its previous restrictions on U.S.-based companies like Google and Facebook, as part of its strategy to nurture domestic internet giants. In response, the United States has also imposed restrictions on Chinese products like Huawei and TikTok as part of an ongoing battle for economic security and technological supremacy.
Apple’s future market share prices remain uncertain
The recent decline in Apple’s market value, amounting to a staggering $200 billion over the past two days, can be partially attributed to China’s decision to prohibit its government workers from using iPhones.
In the wake of reports about the ban, Apple’s shares saw a 3.4% drop on Thursday, marking the company’s most significant daily decline in over a month. China is Apple’s largest foreign market, with Chinese sales contributing approximately a fifth of the company’s total revenue last year.
China’s decision to expand the ban on iPhones stems from national security and economic considerations. Beijing aims to reduce its reliance on foreign technology, particularly American software and circuitry, in a bid to prevent the leakage of sensitive information.
By implementing this restriction, China seeks to bolster its indigenous tech industry and protect its interests. As the expanded iPhone ban takes effect, Apple’s future market share and share prices in China remain uncertain.
The company will need to navigate these challenges and explore alternative strategies to mitigate the potential impact on its business in one of its most critical markets.
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