TAIPEI, Sept. 8 (Reuters) China’s tightening iPhone restrictions for government employees sparked a tech stock sell-off on Friday, raising concerns that Apple (AAPL.O) and its suppliers could suffer from Sino-U.S. tensions and Huawei rivalry.
Apple shares fell 6.4% in the last two days, wiping $190 billion off its market valuation, after Beijing urged some central government agency employees to stop using iPhones at work in recent weeks.
Huawei released two new smartphones on Friday, the foldable Mate X5 and Mate 60 Pro+, adding to a line it unveiled last week that garnered global notice for its resistance to U.S. sanctions.
The sequence of unexpected new product announcements by China’s “national champion,” days before Apple’s iPhone debut, is driving sales anxiety in one of Apple’s major markets.
Apple has done well in China
In 2019, the U.S. restricted tech exports to Huawei, which devastated its smartphone industry.
Analysts predict its latest product launches may be the start of its Apple-rivalling comeback.
“Huawei can manage the psychological expectations of the target consumer group before Apple’s press conference,” said Counterpoint analyst Ivan Lam.
“We believe Huawei’s action was planned and not sudden. Our new product release forecast is better than expected.”
It was unclear how extensive the iPhone ban is, as China’s core government agencies’ employee numbers are not publicly published. Some personnel told Reuters they had no such orders.
However, Bank of America estimates that China sells up to 50 million iPhones annually, and a ban may cost 5-10 million.
This proposed ban is “interesting” because “the recent launch and availability of a domestic high-end smartphone as a real alternative to an iPhone coincides with the timing of this potential ban.”
Apple: US INSPECTION
Some Wall Street analysts said the limits showed that even a firm with a solid relationship with the Chinese government and a major presence in the world’s second-largest economy was vulnerable to escalating tensions.
Beijing wants to minimize its reliance on American tech, while Washington wants to restrict China’s access to crucial technologies like cutting-edge semiconductor technology. Sino-U.S. tensions have increased.
The U.S. Commerce Department said late Thursday it’s gathering further information “on the character and composition” of the new Huawei chip that may violate trade rules.
“The restrictions in place since 2019 have knocked Huawei down and forced it to reinvent itself — at a substantial cost to the (Chinese) government,” the agency said. “We constantly assess and update our controls based on the dynamic threat environment and will take appropriate action to protect U.S. national security.”
White House National Security Adviser Jake Sullivan told Air Force One reporters the U.S. is investigating the Huawei chip.
Suppliers tumble
Qualcomm (QCOM.O), a major Apple supplier, fell 7.2% on Thursday, leading significant tech losses.
Other iPhone suppliers including Broadcom (AVGO.O), Skyworks Solutions (SWKS.O), and Texas Instruments (TXN.O) fell 1.8% to 7.4%.
“This announcement seems to have just refocused investors that the U.S.-China relationship is a big risk to current equity prices, particularly in technology,” said Cherry Lane Investments partner Rick Meckler.
Tokyo Electron (8035.T) fell 4% in Asia, while TSMC (2330.TW), the world’s largest contract chipmaker and Apple supplier, fell 0.6%.
ASE Technology Holding (3711.TW), a major semiconductor testing and packaging company, declined 1.7%, while camera lens maker Largan Precision (3008.TW) plunged more than 4%.
Luxshare Precision Industry (002475.SZ), which makes iPhone, MacBook, and AirPod connector cables and owns iPhone plants, declined 2% in China. Huawei’s introduction last week hurt its shares.
After Huawei’s Mate 60 Pro+ smartphone announcement last week, semiconductor shares (.CSIH30184) surged 0.8% on the belief that its new chip demonstrated the business had surmounted U.S. sanctions.
Sunlour Pigment (301036.SZ) rose 20%, Shenzhen Rongda Photosensitive & Technology Co (300576.SZ) roughly 10%, and Semiconductor Manufacturing International Corp (SMIC) 0.7%.
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