In a turn of events, Apple Inc. has witnessed its shares tumble for the second consecutive day following reports of an unprecedented ban imposed by the Chinese government on the use of iPhones by its officials.
This development has dealt a significant blow to the tech giant, causing its stock market valuation to plummet by over 6%, equivalent to almost $200 billion (£160 billion), over just two days.
As China represents Apple’s third-largest market, accounting for 18% of its total revenue in the previous year, the implications of this ban are far-reaching.
A Blow to Apple’s Presence in China
The ban came to light when The Wall Street Journal (WSJ) reported that the Chinese government had issued directives instructing central government agency officials to abstain from bringing iPhones into their offices and using them for work purposes.
Moreover, the ban may extend to encompass employees of state-owned companies and government-backed agencies, as reported by Bloomberg News. These instructions, which were conveyed by superiors to their subordinates in recent weeks, have also placed restrictions on the usage of other foreign-branded devices.
Although iPhones were already prohibited in certain government agencies, sources suggest that this ban has now been expanded, with the extent of its dissemination throughout Chinese officialdom remaining unclear.
Apple’s Vulnerability in a Vital Market
Apple’s problem is magnified by the fact that China serves as the primary manufacturing hub for most of its products, thanks to its largest supplier, Foxconn. The ban’s implications impact not only the tech giant itself but also its suppliers.
Qualcomm, the world’s largest supplier of smartphone chips, experienced a more than 7% decline in its shares on the day following the ban’s revelation. Additionally, South Korea’s SK Hynix witnessed a nearly 4% drop in its shares on the subsequent day. This downturn highlights the ripple effect that Apple’s struggles can have on its broader ecosystem.
Escalating US-China Tech Tensions
This ban comes at a time when tensions between the United States and China in the tech sector are steadily intensifying. Both nations have imposed various restrictions on each other. Earlier this year, the United States, along with its allies Japan and the Netherlands, limited China’s access to crucial chip technology.
China retaliated by imposing restrictions on the exports of materials essential to the semiconductor industry. In addition, Beijing has reportedly been preparing a substantial $40 billion investment fund to bolster its domestic chip-making capabilities.
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Huawei’s Surprise Move and China’s Semiconductor Progress
Chinese tech giant Huawei recently made waves in the industry by unveiling its Mate 60 Pro smartphone during a visit by U.S. Commerce Secretary Gina Raimondo to Beijing. The smartphone was accompanied by a new 5G Kirin 9000s processor, developed for Huawei by China’s largest contract chipmaker, SMIC. Experts see this as a significant stride forward for China’s semiconductor industry.
Investment firm Jefferies noted that this represents a “big tech breakthrough for China,” underscoring the nation’s ambition to reduce its reliance on foreign-made semiconductors.
Calls for Further Restrictions on Huawei and SMIC
The escalating tech tensions have also reached the U.S. Congress, where Mike Gallagher, chairman of the House of Representatives committee on China, has urged the Commerce Department to impose additional export restrictions on Huawei and SMIC.
This further underscores the heightened concerns surrounding the tech rivalry between the two economic giants.
Security Update Amidst Ongoing Challenges
Simultaneously, Apple has been grappling with ongoing security challenges. The company recently issued an emergency software update for numerous old and current devices after a security vulnerability was discovered and exploited by unknown hackers.
This update came in response to findings by digital rights investigators at Citizen Lab, who uncovered attackers using a novel technique to compromise Apple devices. This marks the 15th time this year that Apple has had to release sweeping security updates, highlighting the persistent and evolving threats facing the tech giant.
As Apple contends with the fallout of the Chinese government’s ban on iPhones, the company finds itself embroiled in a complex web of international tech tensions. The repercussions of this ban extend not only to Apple but also to its suppliers and the broader tech industry.
In the midst of these challenges, Apple must navigate an evolving security landscape, further showing the complex and interconnected nature of the tech industry in a rapidly changing global environment.