Apple stocks tumble amid iPhone restrictions in China

In a tumultuous week marked by escalating geopolitical tensions between China and the United States, Apple Inc., the world’s largest publicly-traded company, faced a significant setback. Apple shares experienced a sharp decline for the second consecutive trading session as reports emerged of substantial restrictions on iPhones within Chinese government offices and state-backed entities.

Apple’s stock price plummeted by 2.8 percent, reaching $177.79 in late morning trading on Thursday, following a 3.6 percent drop on the previous day, driven by a report published by The Wall Street Journal. This report disclosed China’s prohibition of Apple smartphones within central government agencies, thus curtailing their usage.

Subsequently, on Thursday, Bloomberg News further compounded Apple’s woes with news that China intended to expand the ban to encompass government-backed agencies and state-owned enterprises, thereby amplifying the reach of this policy within a centrally-planned economy.

The move by the Chinese government underscores the intensifying tensions between Beijing and Washington, as both global powers vie for supremacy in the realm of technology, which has increasingly emerged as a critical national security concern for both sides. Notably, government agencies and state-owned enterprises in both nations have spearheaded efforts to endorse locally manufactured tech products, a strategy aimed at reducing dependency on foreign technology companies.

The Bloomberg report hailed the recent release of a Huawei smartphone employing a domestically produced processor as a “triumph” in the wake of US-imposed sanctions. This shift away from foreign technology highlights China’s resolve to bolster its domestic tech industry and assert its autonomy in the sector.

Within government circles, this move has not gone unnoticed. Sources within at least three ministries and government bodies have confirmed that employees were explicitly instructed to refrain from using iPhones during work hours. These insiders, who requested anonymity due to the sensitivity of the situation, noted that a specific deadline for ceasing iPhone usage had not yet been communicated, raising questions about the enforcement of this sweeping ban.

It’s worth recalling that in 2020, the state-owned Chinese financial publication, Economic Observer, reported on the adoption of rules within government agencies that prohibited officials from using iPhones. The basis for this ban lay in Apple’s stringent privacy protocols, which posed challenges for anticorruption officials seeking access to and investigation of suspects’ phones.

China remains a crucial market for Apple, contributing nearly a fifth of its total revenue. With numerous employees and suppliers operating within China, CEO Tim Cook has consistently emphasised the company’s enduring ties to the nation. However, the extension of this ban, imposed over two years ago, presents formidable challenges to Apple, a corporation reliant on China for both revenue growth and manufacturing.

US Representative Mike Gallagher, chairman of the US House panel on China, offered his perspective on this development, asserting, “This is textbook Chinese Communist Party (CCP) behaviour—promote PRC [People’s Republic of China] national champions in telecommunications and slowly squeeze western companies’ market access.” Gallagher went on to caution American tech firms engaging with the CCP, stating, “The clock is ticking.”

In a volatile landscape, Apple finds itself navigating the complex terrain of geopolitics, national security, and market access—a journey fraught with uncertainty as the US-China rivalry continues to evolve.