Reuters, September 7 – On Thursday, Beijing’s expanding restrictions on iPhone usage by government employees worried American lawmakers and stoked worries that American tech companies with significant exposure to China would suffer from escalating tensions between the two nations.
After learning that Beijing had just ordered employees at several central government departments to stop using their Apple phones at work, Apple (AAPL.O) saw its worst two-day percentage decrease since November, down 2.9% after the close of business on Thursday.
The limits, according to several Wall Street experts, demonstrate that even a business with positive ties to the Chinese government and a sizable presence in the second-largest economy in the world is vulnerable to escalating tensions between the two countries.
As Beijing seeks to lessen its reliance on American technology and Washington works to limit China’s access to vital technologies. Particularly cutting-edge semiconductor technology, tensions between the two countries have gotten worse recently.
China’s Huawei debuted its new Mate 60 Pro smartphone last week. The device is powered by a cutting-edge chip produced by Chinese contract chipmaker SMIC (0981.HK), and it appears that this is a breakthrough for the two companies that have been subject to U.S. sanctions.
Iphone: Character And Composition
Late on Thursday, the U.S. Commerce Department announced that it was trying to learn more “on the character and composition” of the chip that might be in violation of trade regulations.
“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 department continued. “We will not hesitate to take appropriate action to protect U.S. national security,” the statement reads. “We are continually working to assess and, when appropriate, update our controls based on the dynamic threat environment.”
On Air Force One, White House National Security Advisor Jake Sullivan told reporters that the United States government is attempting to learn more about the Huawei chip.
There are numerous ways to attempt to understand what exactly it is that we are dealing with in this situation, according to Sullivan. “I can’t tell you a certain timeframe, but this won’t take months to happen. We’ll want to thoroughly consider this, speak with our partners, and have a better understanding of what we’re looking at before making judgments.
The U.S. sanctions hurt Huawei’s operations and gave Apple an opportunity to compete with the Chinese market leader by denying Huawei access to chipmaking equipment necessary for creating the most cutting-edge handset models.
“We see the Mate series phone as an opportunity for Huawei to increase its shipments and regain its market share,” analysts at BofA Global Research said. Huawei has the capacity to deliver and scale its in-house Kirin 9000S (chips).
The Biden administration has been under pressure to be even more harsh with Beijing as a result of lawmakers from both major U.S. parties speaking out about vulnerabilities to national security they believe China’s goods to be posing.
IPHONE SLIPPERY
In an otherwise difficult moment for iPhone sales, China has been a bright spot for Apple.
“China is a crucial market for Apple, not just because it’s a super-important manufacturing hub. But also because the country is an increasingly important source of revenues,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown.
Nearly 5% of Apple’s income comes from the nation.
In terms of sales of high-end smartphones, competitors are already closing the gap, and Streeter warned that if things got worse, they could have a better chance of dethroning Apple.
However, with an event next week where it is anticipated to introduce its iPhone 15 line-up. As well as new smartwatches, Apple may experience an increase in demand.
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