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Shares of Apple (AAPL) are down more than -1% today after Bloomberg News reported that more Chinese agencies and government-backed firms across the country have ordered staff to stop bringing iPhones and other foreign electronic devices to work, a significant step up from September when a small number of agencies in Beijing and Tianjin began telling staff to leave foreign devices at home. This heightened prohibition of Apple products is likely to hurt the company’s sales in China, where Apple receives 20% of its revenue.
Bloomberg News reported that multiple state firms and government departments across at least eight Chinese provinces instructed employees in the past month or two to ditch foreign-made electronics and start carrying local Chinese-made brands. This broader and more coordinated effort marks a stepped-up effort in China’s campaign to wean itself off American technology and boost the prominence of Chinese brands, including Huawei Technologies Co.
In September, Bloomberg News reported that China decided to expand a ban on foreign devices beyond the most sensitive departments to encompass many more government agencies and even state firms. Then, this month, smaller firms and agencies in lower-tier cities began issuing their own verbal directives, suggesting a much broader movement is beginning. While Chinese software and hardware have gradually replaced American products over the years, from Microsoft software to Dell computers and Intel chips, these new mandates pose a direct hit to Apple’s market share in China.
It is unclear precisely how many government agencies have issued directives, nor how widespread they’ve been. Different Chinese organizations will likely vary in how they enforce the restrictions, with some forbidding Apple devices from the workplace and others barring their use entirely. The Chinese government has previously pushed back on reports about iPhone restrictions while raising concerns about the device's security. In September, China’s Foreign Ministry said, “China has not issued laws and regulations to ban the purchase of Apple or foreign brands’ phones.”
These latest moves by China extend a years-long effort to root out foreign technology in sensitive environments and coincide with China’s push to become self-sufficient in critical areas. It remains to be seen how far China pushes back on using Apple’s products within the country. Apple gets the majority of its iPhones from factories in China run by suppliers like Foxconn Technology Group that employ millions of Chinese. Apple has already begun shifting more of its production capacity to other countries, including India, and may reduce production in China even further after these latest developments to restrict iPhone usage.
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
