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Apple loses $260 billion in 2 days after reports of China widening iPhone curbs

WASHINGTON – Apple shares fell about 3 per cent on Thursday, following a 4 per cent decline on Wednesday, after reports that China plans to expand a ban on the use of iPhones in sensitive departments to government-backed agencies and state companies.

Several agencies have begun instructing staff not to take along their iPhones to work, people familiar with the matter said, affirming a previous report from The Wall Street Journal.

In addition, Beijing intends to extend that restriction far more broadly to a plethora of state-owned enterprises and other government-controlled organisations, said the people.

Several Wall Street analysts said the reported restrictions – which have not been publicly announced by Beijing – show that even a company with a good relationship with the Chinese government and a large presence in the world’s second-largest economy was not immune to rising tensions between the two nations.

Apple shares slid about 6.5 per cent in two days, wiping out US$190 billion (S$260 billion) in value.

China is Apple’s biggest foreign market and global production base.

Apple supplier Qualcomm, one of the US companies with the largest China presence, tumbled nearly 7 per cent on Thursday to lead losses among major tech firms.

Other suppliers of the iPhone maker including Broadcom, Skyworks Solutions and Texas Instruments were also lower, falling between 1.8 per cent and 7.3 per cent.

Shares of several major Apple suppliers in Asia also fell on Friday.

Taiwan Semiconductor Manufacturing Company, the world’s largest contract chipmaker, dropped about 0.7 per cent.

ASE Technology Holding, one of the world’s largest semiconductor testing and packaging companies, fell more than 2 per cent, while camera lens maker Largan Precision dropped more than 3 per cent.

“Apple’s growth story is heavily reliant on China, and if the Beijing crackdown intensifies, that could pose a big problem to the bunch of other megacap tech companies that rely on China,” said Mr Edward Moya, senior market analyst for the Americas at Oanda. 

US-China friction has worsened in recent years as Washington tries to restrict China’s access to key technologies including cutting-edge chip technology, and Beijing looks to reduce its reliance on American tech.

Lawmakers of both major US parties have been vocal in their concerns about national security risks allegedly created by China’s products, pressuring the Biden administration to get even more aggressive with Beijing.

The wider ban is not surprising and shows how China is trying to limit a Western company’s market access to the nation, said US Representative Mike Gallagher, the chairman of the House panel on China.

US Senator Mark Warner, a Democrat and chairman of the Senate Intelligence Committee, also shared similar concerns and said that “as the Chinese economy stalls, we can potentially anticipate more aggressive moves against foreign businesses”.

iPhone slowdown

China has been a bright spot for Apple in an otherwise tough period for iPhone sales.

Apple gets nearly a fifth of its revenue from the country, its biggest foreign market and global production base.

“China is a crucial market for Apple, not just because it’s a super-important manufacturing hub, but because the country is an increasingly important source of revenues,” said Ms Susannah Streeter, head of money and markets at Hargreaves Lansdown.

“Already, rivals are closing the gap in high-end smartphone sales, and if the situation were to escalate this could potentially allow competitors to have a greater chance of stealing Apple’s crown,” she said.

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China’s Huawei last week launched its new Mate 60 Pro smartphone, which is powered by an advanced chip made by Chinese contract chipmaker Semiconductor Manufacturing International Corporation and marks a breakthrough for the duo hit by United States sanctions.

Those sanctions cut Huawei’s access to chipmaking tools essential for producing the most advanced handset models, hammering the company’s business and allowing Apple to take some market share from the national favourite in China.

“If Huawei has the capability to supply and scale its home-grown Kirin 9000S (chips), we see the Mate series phone as an opportunity for Huawei to increase its shipments and regain its market share,” analysts at BofA Global Research said.

Apple could, however, see a demand boost after an event next week where it is expected to unveil its iPhone 15 line-up, as well as new smartwatches.

BLOOMBERG, REUTERS

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