Apple Shares Tumble as China Expands iPhone Ban to Government-Backed Entities

Apple Shares Tumble as China Expands iPhone Ban to Government-Backed Entities | The Entrepreneur Review

Apple Inc. (AAPL) faced a tumultuous day on Thursday as its shares plummeted by 2.9%, marking the most substantial daily decline in over a month. The sharp drop follows reports that China is planning to extend its ban on iPhones to encompass government-affiliated agencies and state-backed enterprises.

Effects of the Ban

Investors have grown increasingly concerned about the repercussions of this ban, raising questions about Apple’s ability to maintain a robust presence in the world’s second-largest economy.

Over the past two days, Apple, the world’s most valuable publicly traded company, witnessed a staggering loss of approximately $200 billion in market value. This rapid descent has positioned Apple’s stock as the poorest performer in the Dow Jones Industrial Average.

China’s Role

For Apple, China holds significant strategic importance as the largest foreign market for its products. In the past year, Chinese sales accounted for approximately one-fifth of the company’s total revenue. While Apple does not publicly disclose iPhone sales by country, research firm TechInsights suggests that China surpassed the United States in iPhone sales last quarter. Furthermore, the majority of iPhones are manufactured in Chinese factories.

Historically, Apple has been viewed as a relatively secure entity in China due to its economic contributions to Beijing. Brandon Nispel, an analyst at KeyBanc Capital, noted that Apple has played a crucial role in Beijing’s economy. However, the recent bans on iPhone use raise the question of whether the Chinese government is altering its stance towards the tech giant.

The Wall Street Report

Earlier this week, the Wall Street Journal reported that China had prohibited central government officials from using iPhones, with notifications of the ban disseminated through chat groups and meetings. Subsequently, Bloomberg reported on Thursday that this ban had expanded to include state-backed companies such as energy behemoth PetroChina, which employs millions of workers and exerts substantial influence over the Chinese economy.

In a note released on Thursday, analysts at Bank of America highlighted the interesting timing of these bans, coinciding with the launch of a high-end flagship smartphone by Chinese manufacturer Huawei. The US government has initiated an investigation into this new smartphone, citing concerns about its composition and potential circumvention of American semiconductor export restrictions.

The tech industry at large felt the impact of these developments. The Nasdaq Composite declined by approximately 0.9% on Thursday, while the semiconductor sector experienced a more pronounced drop of over 2%.

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