Apple's shares experienced a 2.9% decline on Thursday in response to reports indicating China's plans to expand its ban on the use of iPhones to encompass government-backed entities and corporations. This development has caused concerns among investors regarding Apple's ability to operate in the world's second-largest economy, CNN reports.
Apple, the world's most valuable publicly traded company, suffered its most significant daily drop in over a month, losing approximately $200bn in just two days. Presently, Apple's stock is the poorest performer in the Dow Jones Industrial Average.
These potential bans pose a worrisome scenario for Apple, as China constitutes the largest foreign market for the company's products. Chinese sales accounted for roughly one-fifth of Apple's total revenue last year. While Apple does not disclose iPhone sales by country, estimates from research firm TechInsights suggest that China surpassed the United States in iPhone sales during the last quarter. Furthermore, the majority of iPhones are manufactured in Chinese factories.
The significance of Apple in Beijing's economy was highlighted by Brandon Nispel, an analyst at KeyBanc Capital, who stated that Apple has historically been considered relatively immune to government restrictions in China due to its economic contributions. These newly reported bans raise the question of whether the Chinese government's stance towards Apple is evolving.
On Wednesday, the Wall Street Journal reported that China had banned iPhones for central government officials, with notices of the ban being communicated through chat groups or meetings. Subsequently, Bloomberg reported on September 7 that these bans have been extended to state-backed companies, including the energy giant PetroChina, which employs millions and controls significant sectors of the Chinese economy.
Bank of America analysts noted on September 7 that the potential iPhone ban coincided with the release of a new high-end flagship smartphone by Chinese manufacturer Huawei, which the U.S. government is currently investigating. National Security Adviser Jake Sullivan emphasized the need for more information to determine if American export restrictions on semiconductors were violated in the production of the new chip.
The news led to a decline in tech companies, with the Nasdaq Composite dropping by around 0.9% on Thursday and the semiconductor sector falling by over 2%.
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