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An investor warning that China could crack down on authorities’ use of the iPhone has knocked $200bn off Apple’s market value, casting a shadow over the launch of its latest smartphone next week.
Beijing’s announced restrictions on government iPhones, combined with a resurgent Huawei, threaten to derail what should have been Apple’s moment of triumph: dethroning Samsung at the top of the smartphone market.
Before the China turmoil, analysts had predicted that the launch of the iPhone 15 would make Apple the world’s largest smartphone maker for the first time.
However, Apple’s shares have fallen about 6 percent in the past two days as investors worry about its fate in China, which accounts for about a fifth of its revenue.
“A decade ago it seemed unthinkable that Apple could take the top spot from Samsung, but we may be on the cusp of that milestone,” said Ben Wood, analyst at CCS Insight. “They will be very close, but the Chinese market will play an important role.”
Several reports emerged this week that Beijing has ordered public officials in some government departments not to use iPhones or other foreign devices for work.
Bank of America estimates that China accounts for up to 50 million of its annual iPhone sales, and that such a ban would cost Apple 5-10 million units a year.
There has been no official word from the Chinese government on the matter. Apple declined to comment on any ban, which was first reported by The Wall Street Journal.
At the same time, Apple faces the unexpected return of its toughest competitor in China: Huawei.
Last week, China’s “national champion” unveiled a new flagship phone, the Mate 60 Pro, which appears capable of delivering 5G speeds despite Washington-led efforts to block Huawei’s ability to offer advanced chips.
Sanctions imposed by Washington against the Chinese telecom group since 2019 have been devastating. Huawei’s smartphone market share in China fell from 29 percent in mid-2020 to just 7 percent two years later.
However, the Mate 60 Pro — which starts at Rmb 6,999, about $970 — has been flying off the shelves in the past week. TF International Securities analyst Ming-Ci Kuo estimated Huawei could ship 6 million units of its latest model by the end of the year, raising its total 2023 shipments by 65 percent to 38 million.
The overall smartphone market will decline for the second year in a row to 1.145 billion units in 2023, the lowest in a decade. Apple’s global market share has grown from 15 percent to 20 percent over the past decade as competition from Huawei has waned.
Apple is set to unveil four new iPhone 15 models on Tuesday. Improvements to the new model are expected to increase, with a switch to industry-standard charging ports – mandated by new Brussels rules on device makers – in expected updates.
Still, Wall Street analysts predict there are enough iPhone owners in its 1.2bn-strong customer base that Apple wants to upgrade to sell 78 million devices in the busy December quarter. That would represent an 8 percent gain from a year ago, when Covid-19 protests disrupted iPhone production in China.
Analysts at Counterpoint Research say that Apple will outpace Samsung this year by unit volume. This will give Apple the global smartphone sales crown for the first time in 16 years since the iPhone went on sale. Both smartphone makers are expected to sell less than 230 million units in 2023, Counterpoint estimates, making it too much of a race to call ahead of the new iPhone launch.
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