The big apple has become a little smaller. And we're not talking about New York, but the star tech brand from Cupertino, California. Apple has lost about $200 billion in market capitalization over the past week as tensions between the U.S. and China escalate, with several media outlets reporting (the first being the Wall Street Journal) that Beijing wants to restrict iPhone use to Chinese state employees. Apple shares fell 3% on Thursday and are down more than 5% for the week.
"Beijing is looking to reduce its dependence on US technology and this ban is a significant obstacle for Apple, as China is its largest international market and accounts for nearly 20% of its revenue," he said. remember Victoria Scholar, Head of Investments at Interactive Inversor, a UK investment platform.
Chinese Foreign Ministry spokesman Mao Ning said yesterday that "products and services from any country are welcome in the Chinese market as long as they comply with Chinese laws and regulations." Tensions between the U.S. and China have been rising, and early last month President Joe Biden signed an executive order to impose blocks and regulations on U.S. high-tech investment in China.
The iPhone ban comes at a bad time for Apple, which is preparing for the launch of its latest product. It is expected to unveil its latest smartphone, the iPhone 15, on Tuesday, September 12. Reports are circulating that big changes are coming for the iPhone, including a change from Apple's connector to the plug USB-C that rivals are starting to adopt, partly in response to an EU mandate, and there are unknowns about how the market will react.
Apple also faces a threat from Chinese tech giant Huawei, which recently launched its latest flagship smartphone, the Mate 60 Pro. According to early reports, the phone has enough power and speed to rival the iPhone and is selling fast in China.
"Apple shares are unlikely to outperform in the second half of the year as a high valuation and rising China risks put a damper on a highly anticipated product launch next week" , according to a report from JPMorgan China. “The restrictions will make it more difficult for Apple to continue generating profits,” they wrote.
The situation is not the best. Consulting firm Counterpoint Research expects smartphone shipments to decline 6% year-on-year to 1.15 billion devices in 2023, the worst figure in a decade. "Despite the strength of the labor market and falling inflation, consumers are hesitant to upgrade their devices," the research firm said.
Likewise, Apple's shares have accumulated gains of nearly 40% since the beginning of the year and present a valuation multiple of 27 times one-year earnings. In a word, they are already expensive. And Apple is trading at a 16% premium to its five-year average. China's chaos may be the perfect excuse for some to make a profit.
