According to reports, China has banned the use of Apple smartphones in central government agencies, leading to a sharp drop in Apple’s stock.
Apple shares fell sharply for a second straight after reports of significant Chinese restrictions on iPhones at government offices and state-backed entities amid rising tensions between China and the United States.
Shares of the world’s largest publicly traded company fell 2.8 percent to $177.79 in late morning trading Thursday, after falling 3.6 percent on Wednesday following a Wall Street Journal report that China’s use of Apple’s banned smartphones from central government agencies.
A Bloomberg News report released on Thursday said China planned to extend the ban to government-backed agencies and state-owned enterprises, increasing the effect of the policy in a centrally planned economy.
The move came amid rising tensions between Beijing and Washington.
China has increasingly emphasized the use of locally made technology products as technology has become a major national security issue for Beijing and Washington.
Government agencies and state-owned enterprises (SOEs) in both countries have been the first and foremost areas where such a campaign has been promoted.
The Bloomberg report said last week’s release of a Huawei smartphone with a Chinese-made processor was hailed in Chinese state media as a “triumph” in the wake of the US sanctions.
The government discourages iPhone use
Employees at at least three ministries and government agencies were told not to use iPhones at work, sources familiar with the matter told Reuters news agency, but declined to name due to the sensitivity of the situation.
One of the sources said they had not yet been given a deadline to stop using their iPhones and it was not immediately clear how widely enforced the ban was.
Apple and China’s State Council Information Office, which handles media inquiries on behalf of the government, did not immediately respond to requests for comment.
In 2020, China’s state financial publication Economic Observer reported that some government agencies had implemented rules to ban officials from using iPhones due to Apple’s strict privacy regulations that make it difficult for anti-corruption officials to access and examine suspects’ phones.
A move could slow Apple’s revenue growth
China is one of Apple’s largest markets, generating nearly one-fifth of its revenue. Apple, along with its suppliers, employs thousands of workers in China, and CEO Tim Cook emphasized its long-standing ties to the country during a visit to Beijing in March.
The extension of a ban imposed more than two years ago signals growing challenges for the American company, which relies heavily on China for revenue growth and production.
“We believe the restrictions have the potential to slow Apple’s sales growth in China,” said DA Davidson analyst Tom Forte.
“This could be an additional challenge for the company as revenues from China have already been negatively impacted by a challenging macroeconomic environment in that country.”
Briefing.com analyst Patrick O’Hare said the Apple situation has implications for other tech companies.
“The concern for the market is that if China deliberately chooses to make business difficult for a company like Apple, which has a good and important working relationship in China, it could do the same for many other U.S. companies doing business in China. China. O’Hare said.
The chairman of the US House of Representatives panel on China said the ban was “unsurprising”.
“This is the behavior of the Chinese Communist Party (CCP) – promote the PRC [People’s Republic of China] national champions in telecommunications, and slowly undermining the market entry of Western companies,” U.S. Representative Mike Gallagher told Reuters.
“US tech companies seeking to join the CCP should realize that the clock is ticking,” added Gallagher, a Republican.
