Photographer: Qilai Shen / Bloomberg
Photographer: Qilai Shen / Bloomberg
Apple Inc. spent years building China into a $ 44 billion growth driver. Then last week the American president threw all that into doubt.
IPhone loyalists across China are now considering their attachment to the device after Donald Trump issued an executive order last week to unlock U.S. companies doing business with WeChat, the super-app that has become integral to daily life in the country . Plans to go live in about five weeks threaten to ban iPhones from being made into expensive “electronic trash,” said Hong Kong resident Kenny Ou, who sees WeChat as one of the most essential software on his handset .
Customers wearing protective masks will see products on display at an Apple Inc. store in Shanghai on March 2.
Photographer: Qilai Shen / Bloomberg
On Wednesday, Tencent executives held a conversation after a conference on earnings stressed that they believed the ban was only applied to WeChat in the US and it should not affect its Chinese cousin, known as Weixin. But she added that she herself was still seeking clarity, and the sweeping language of Trump’s order means it could still spell trouble for Apple.
The American company has just come off a strong quarter in China, its main international market and where it faces stiff competition from local Android rivals such as Huawei Technologies Co. – which, unlike Apple and its locked app stores, are free to offer WeChat directly if their users have access to download it themselves. The Cupertino company’s strategy of tapping first-time buyers and awaiting consumers back with cheaper devices such as the iPhone SE could be completely derailed if it could not offer WeChat and continue to exacerbate US and China trade tensions.
The flagship app of Tencent Holdings Ltd. connects a billion users worldwide and is used for everything from chatting with friends to shopping for movie and train tickets to paying for restaurant and utility bills. While questions remain about how Trump’s mandates will be implemented, any ban on the use of WeChat threatens to erase a major communications link between China and the rest of the world and prevent US companies such as Starbucks Corp. and WalMart Inc. consumers reach in the second largest economy in the world.
If Apple were forced to remove the service from its worldwide app stores, annual iPhone shipments would drop 25% to 30%, while other hardware, including AirPods, iPad, Apple Watch and Mac computers, could fall 15% -25%, TF International Securities analyst Kuo Ming-chi rumored in a research note. Apple did not immediately respond to a request for comment from Bloomberg News.
A survey on the twitter-like Weibo service asking consumers to choose between WeChat and their iPhones has so far garnered more than 1.2 million responses, with roughly 95% of participants saying they would rather give up their devices. “The ban will force many Chinese users to switch from Apple to other markets because WeChat is really important to us,” said Sky Ding, who works in fintech in Hong Kong and is originally from Xi’an. “My family in China are all used to WeChat and all of our communication is on the platform.”
Read more: Apple serves IPhone sales risk in China from Trump’s WeChat ban
Customers at an event promoting the release of the iPhone in Beijing, China, on October 30, 2009.
Photographer: Nelson Ching / Bloomberg
Apple’s iPhones were first launched in China in 2009, two years after sales began in the US, and the company has shipped more than 210 million units in the country over the past five years, according to Bloomberg calculations based on IDC data. More than a fifth of all smartphone users in China have used an iPhone since June, second only to Huawei at 26%, according to researcher QuestMobile. The company has 42 stores in the country that also host most of the world’s iPhone manufacturing. And at its peak, Greater China accounted for 25% of Apple’s revenue, although that share slipped to 17% in the last fiscal year, with sales in the region amount to roughly $ 43.7 billion.
Apple had counted on the next generation of its flagship handset – expected to launch in October and the first in the series to include 5G – to await potential customers such as Vincent Han, a Shanghai-based commodities retailer who was planning to replace his Huawei handset with an iPhone. He has since followed those plans and is considering alternatives included Samsung Electronics Co.
“I’m worried that WeChat will be banned on the iPhone. This will affect my work to a large extent, as 90% of my clients and colleagues communicate via WeChat, “Han said.” Still, even Samsung’s Samsung operating system was developed by Google and I’m worried that Android platform WeChat will also be excluded. “
Ready to fill the void left by the iPhone will be a legion of high-spec, high-value 5G devices from local brands Xiaomi Corp., Oppo and Vivo, as well as market leader Huawei. Xiaomi just announced the flagship Mi 10 Ultra, intended for China only, and it has a full portfolio of devices to replace Apple’s range, including fitness tracking watches, wireless earphones, tablets and laptops.
Ou, an engineering student, is one of the millions of die-hard Apple fans in China who may have to make a tricky choice between his favorite iPhone and the ubiquitous app. “All my products are from Apple – my Macbook, iPad, iPhone and even AirPods,” he said in an interview with his native Shanghai. “Apple has made a robust link from its products and made me strongly dependent on its brand. It would be a great disaster for my studies and work if such a ban were imposed. ”
– With the help of Yuan Gao, and Debby Wu
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